APR (the rate banks advertise) and APY (what you actually earn) are different. Compounding turns your APR into a higher effective yield. Use this calculator to see your real annual return and project your savings growth.
APR (Annual Percentage Rate) is the simple interest rate a bank advertises. APY (Annual Percentage Yield) is what you actually earn once compounding is factored in. The more frequently interest compounds, the higher your APY relative to your APR.
Formula: APY = (1 + APR/n)ⁿ − 1, where n is the number of compounding periods per year.
For FIRE planning, high-yield savings accounts and money market funds use daily or monthly compounding. Even a small difference in APY compounds significantly over years — which is why this number matters more than the advertised APR.
APY is your true annual return once compounding is included — always equal to or higher than the stated APR. Enter your APR and compounding frequency above to see what your savings actually earn, and compare accounts on an apples-to-apples basis.
For long-term growth, see how a rate compounds over decades with the compound interest calculator, or turn your returns into a retirement date with the FIRE calculator.
The same stated rate is worth more the more often it compounds. The gap is small at ordinary savings rates — a few hundredths of a percent between monthly and daily — but it is the reason two accounts advertising the same APR are not the same account.
| APR | Compounded annually | Compounded monthly | Compounded daily |
|---|---|---|---|
| 3.00% | 3.000% | 3.042% | 3.045% |
| 4.00% | 4.000% | 4.074% | 4.081% |
| 4.50% | 4.500% | 4.594% | 4.602% |
| 5.00% | 5.000% | 5.116% | 5.127% |
| 5.50% | 5.500% | 5.641% | 5.654% |
| 6.00% | 6.000% | 6.168% | 6.183% |
Going the other way — APY back to APR — is the same formula rearranged: APR = n × ((1 + APY)1/n − 1). The calculator above does both.
APY (Annual Percentage Yield) is the real rate of return on a savings or investment account, taking into account the effect of compounding interest. Unlike APR, APY reflects how often interest is compounded — daily, monthly, or quarterly — so it gives a more accurate picture of what you actually earn.
APR (Annual Percentage Rate) is the stated interest rate without factoring in compounding. APY includes the effect of compounding and is always equal to or higher than APR. For example, a 5% APR compounded monthly becomes approximately 5.12% APY. When comparing savings accounts, always compare APY for an accurate comparison.
Rearrange the same formula: APR = n × ((1 + APY)^(1/n) - 1), where n is the compounding periods per year. A 5.116% APY compounded monthly comes back to 5.00% APR. This matters when a lender quotes APY and you want to compare it against an APR elsewhere.
APY, always, for anything you earn interest on. It is the only figure that accounts for compounding, so it is the only one that makes two accounts comparable. US banks are required to advertise savings accounts in APY for exactly this reason. For borrowing the convention flips: loans are quoted in APR.
APY = (1 + APR/n)^n - 1, where n is the number of compounding periods per year. For monthly compounding (n=12) at 5% APR: APY = (1 + 0.05/12)^12 - 1 = approximately 5.116%.