A savings account APR
A stated 6% APR compounded monthly actually yields 6.1678% APY over a year.
APR to APY calculator
This is an estimate for information only. It is not financial advice; check the compounding method disclosed by your bank or lender.
Result
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How it works
Two accounts advertising the same "6% APR" pay different amounts if one compounds monthly and the other daily — the more frequent the compounding, the higher the effective (APY) return, because interest starts earning interest sooner.
This calculator converts either way: from a stated nominal rate to what it actually yields over a year, or from a known effective yield back to the nominal rate a product must advertise to produce it.
Formulas used
APR to APY
APY = (1 + APR ÷ m)^m − 1
- APR
- nominal annual rate
- m
- compounding periods per year
Continuous compounding
APY = e^APR − 1
Worked examples
Matching a target yield
To actually earn 5% APY with daily compounding, a product must advertise an APR of about 4.8793%.
Assumptions and limits
- The rate compounds evenly at the selected frequency for the whole year.
- No fees, taxes or withdrawals affect the stated rate.
Frequently asked questions
Which rate should I compare between two accounts?
Always compare APY (effective rate) — it already accounts for compounding frequency, so it reflects what you actually earn or pay over a year.
Why is APY always higher than APR for the same product?
Because compounding lets interest earn interest within the year; the only exception is annual compounding, where APR and APY are identical.
What is continuous compounding?
A theoretical limit where interest compounds at every possible instant. Very few real products use it, but it sets the ceiling on how much a given APR can yield.
Does this apply to loans as well as savings?
Yes — the same math applies whether the rate is what you earn on a deposit or what you are charged on a debt.
Updated
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