How to convert APR to APY
- Choose APR to APY or APY to APR.
- Enter the Rate as a percentage and pick how often interest is compounded. Bank accounts often compound daily or monthly.
- Read the converted rate. The table shows the same rate at every compounding frequency.
How compounding changes the rate
The more often interest is added, the more you earn on interest already paid. Here is a 5% APR at each frequency:
| Compounding | APY |
|---|---|
| Yearly | 5% |
| Twice a year | 5.0625% |
| Quarterly | 5.0945% |
| Monthly | 5.1162% |
| Daily | 5.1267% |
| Continuous | 5.1271% |
The step from yearly to monthly matters most. Beyond monthly the gains are tiny, so when comparing savings accounts, the APY tells you more than the compounding frequency.
Which rate to compare
Compare savings accounts by APY, since it already includes compounding and lets you line up accounts that compound at different times. For loans and cards, compare APRs, the figure lenders must show in many countries. To work out a payment, put the loan’s interest rate into the loan calculator, or a card’s purchase APR into the credit card payoff calculator. Both do their own monthly compounding, so don’t convert the rate first.