APR to APY Converter
Convert between APR and APY at any compounding frequency. See the true effective yield of a savings account or the true cost of a loan.
APR is the stated yearly rate. APY is what you actually earn (or pay) after compounding. The more frequently interest compounds, the further APY rises above APR for the same nominal rate.
APR vs APY, in one paragraph
APR is the stated annual rate before compounding effects. APY (Annual Percentage Yield) is what you actually earn (on savings) or pay (on loans) when interest compounds during the year. On a 6% APR credit card compounded daily, the true effective rate — what you feel — is 6.18%. On a 4% APY savings account, the underlying APR is roughly 3.93%.
Why banks play this game
Banks advertise whichever number looks better. A savings account: "4.35% APY!" (because it sounds higher). A mortgage: "6.5% rate" (because 6.72% APR with fees sounds worse). If you're comparing two offers, translate them to the same metric before deciding. This converter is designed exactly for that comparison.
When the difference actually matters
For a credit card balance, APR vs APY is noticeable over time. On a $5,000 balance at 24% APR daily-compounded (26.82% APY), you pay about $90 more over a year than a 24% simple-interest calculation suggests. For a 1-year CD earning 5% APY vs APR, the difference is small ($50 on a $10k deposit). Over decades, small differences snowball.
Compounding frequencies in the wild
Daily (365): Most high-yield savings accounts, credit cards. Monthly (12): Mortgages, auto loans, most fixed-rate loans. Quarterly (4):Some bond coupons and older CDs. Annual (1):Many bonds, some older savings products, and the default for quick "back of envelope" calculations.
Rule of thumb
For rates under 15% with monthly or more frequent compounding, APY is typically within 0.5-1% of APR. For very high rates (credit cards 20-30%), the gap widens materially. When in doubt, convert both to APY and compare directly.
Frequently asked questions
Which should I compare when shopping rates?▾
For savings accounts and CDs, compare APY (what you actually earn). For loans, compare APR (which includes fees). Banks advertise the favorable side of each — a savings account touts APY (higher), a loan advertises the interest rate (lower, before APR with fees). Always ask for the opposite number to compare apples-to-apples.
Why does daily compounding barely differ from monthly?▾
Because rates are small in percentage terms. At 10% APR, monthly compounding yields 10.47% APY; daily yields 10.52%. That 0.05% difference matters at huge balances over decades but is irrelevant to most consumer products. The marketing power of 'daily compounding' exceeds its actual financial impact.
What's continuous compounding?▾
The theoretical maximum — compounding at every instant. For APR r, continuous-compounding APY is e^r − 1. At 10% APR: 10.517% continuous vs 10.516% daily. The difference from daily is negligible; real-world accounts never compound continuously.
Does APR always include fees?▾
For mortgages in the US, yes — APR must include most lender fees by law (Truth in Lending Act). For credit cards, 'APR' usually excludes fees. For savings, there's no concept of fees in APR. Context matters; always ask what's included.
Can APY be lower than APR?▾
Yes — for zero-interest (or zero-rate) periods, and for some specific products with complex fee structures. In normal positive-rate compounding contexts, APY is always greater than or equal to APR, with equality only when compounding is annual.
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