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// Rates & interest
What Is APY (Annual Percentage Yield)?
In short
The real yearly return you earn on savings or an investment once compounding is taken into account.
APY builds in the effect of compounding, so it reflects what you will actually earn over a year — not just the headline interest rate. Because of this, APY is always equal to or slightly higher than the plain ("nominal") rate.
It is the saver's counterpart to APR. When comparing high-yield savings accounts, APY is the honest apples-to-apples number, because it already accounts for how often interest is added back in.
For example
A 4.9% rate compounded monthly works out to roughly a 5.01% APY — a small bump, but it is the figure that tells you what you truly take home.
Key points
- The real return after compounding is counted.
- Always ≥ the plain stated rate.
- The right number for comparing savings accounts.
Put it to use
Learning the basics? Follow the whole path from saving to investing.