APR (Annual Percentage Rate) is the stated nominal interest rate, while APY (Annual Percentage Yield) reflects the actual return once compounding is factored in — APY is always slightly higher than APR whenever interest compounds more than once a year.
APR (Annual Percentage Rate) is the stated nominal interest rate, while APY (Annual Percentage Yield) reflects the actual return once compounding is factored in — APY is always slightly higher than APR whenever interest compounds more than once a year. This calculator converts between the two in either direction.
A savings account offers a 5% APR compounded monthly (n=12). APY = (1 + 0.05/12)^12 − 1 ≈ 5.116% — the true annual return is slightly higher than the stated 5% APR.
APR (Annual Percentage Rate) is the simple yearly interest rate before compounding; APY (Annual Percentage Yield) includes the effect of compounding, so it's usually slightly higher for the same nominal rate.
APY = (1 + APR/n)ⁿ − 1, where n is the number of compounding periods per year (e.g. 12 for monthly).
Use APY, since it reflects your true annual return including compounding — it's the fairer number for comparing accounts with different compounding frequencies.