APR ↔ APY Converter

APR (Annual Percentage Rate) is the yearly interest rate without considering compounding effects. APY (Annual Percentage Yield) is the effective annual rate that accounts for compound interest. APY will always be equal to or greater than APR because it includes the effect of earning interest on interest throughout the year.

To convert APR to APY, use the formula: APY = (1 + APR/n)^n - 1, where n is the number of compounding periods per year. For example, a 12% APR compounded monthly (n=12) becomes approximately 12.68% APY. Our calculator handles this conversion automatically for various compounding frequencies.

Banks advertise APY for savings accounts because it shows the higher, true return you\\

For savings, choose accounts with more frequent compounding (daily or continuous) for better returns. The difference is most noticeable at higher interest rates and longer time periods. For a 5% rate over 10 years, daily compounding earns about 0.5% more than annual compounding.

This calculator provides accurate mathematical conversions between APR and APY. However, actual financial products may have additional fees, introductory rates, or variable rates that affect the true cost or return. Always read the full terms of any financial product.