What Is APY (Annual Percentage Yield)?
Example: "My savings account earns 4.5% APY, so $1,000 would grow to about $1,045 in a year."
Why It Matters
APY is the mirror image of APR but for savers instead of borrowers. Where APR tells you what you pay, APY tells you what you earn. The key difference between APY and a plain interest rate is that APY factors in compound interest. If two banks both advertise 4% on savings but one compounds daily and the other compounds monthly, their APYs will be slightly different. Always compare APY, not just the interest rate, when shopping for a savings account.
Try it: Use the free Savings Goal Calculator to see how different APY rates affect your savings growth timeline.
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