APY vs APR Calculator (Converter)
Banks quote APR or APY depending on which looks better. This converter translates between them for any compounding frequency, so you can compare offers on equal terms.
| APR entered | — |
| Interest on your deposit in 1 year | — |
| Difference vs simple (no compounding) | — |
APR vs APY in one sentence each
APR (annual percentage rate) is the flat yearly rate before compounding. APY (annual percentage yield) is what you actually earn after interest starts earning interest within the year.
APY = (1 + APR ÷ m)m − 1, where m = compounding periods per year
A 5% APR compounded monthly is a 5.116% APY; compounded daily, 5.127%. Small at 5% — bigger at card rates: 24% APR compounded daily is a 27.1% APY, which is what carrying a balance really costs.
Why banks quote both — strategically
| Product | Quoted as | Why |
|---|---|---|
| Savings accounts, CDs | APY | The bigger number — looks generous |
| Loans, credit cards, mortgages | APR | The smaller number — looks cheap |
The rule for comparing offers: convert everything to the same unit. Two savings accounts quoting "5.00% APR daily compounding" and "5.10% APY" are nearly identical — this converter settles it in seconds.
Frequently asked questions
What is 5% APR as APY?
Compounded monthly: 5.116% APY. Compounded daily: 5.127% APY. The more frequent the compounding, the higher the effective yield — with rapidly diminishing returns beyond monthly.
Which is higher, APR or APY?
APY is always equal or higher than the APR it comes from, because it includes compounding. They are equal only with annual compounding.
Why do savings accounts advertise APY but loans advertise APR?
Marketing. APY is the larger number, flattering for savings products; APR is the smaller number, flattering for debt. US law (Truth in Savings / Truth in Lending) standardizes which must be disclosed, which conveniently matches this pattern.
Does compounding frequency matter much?
Between annual and monthly, yes — 5% becomes 5.116%. Between monthly and daily, barely — 5.116% vs 5.127%. Do not pick a bank for daily compounding; pick it for the higher APY.
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Last updated: 2026-07-08