Quick answer
This calculator converts a nominal interest rate and compounding frequency into APY — the effective annual yield — and can run the conversion in reverse. A 4.8% nominal rate compounded monthly is a 4.91% APY; compounded daily it is about 4.92%. Banks must quote APY on deposit accounts so you can compare them on equal terms.
How the APY Calculator works, step by step
Choose a direction first. Forward mode takes the nominal (stated) annual rate a bank advertises and shows the true yield after compounding. Reverse mode takes a quoted APY and backs out the nominal rate behind it — handy when you want to compare a deposit against a loan quoted in APR. Then pick the compounding frequency: annually, quarterly, monthly or daily.
APY answers the question that matters for a deposit: if I leave $100 here for a year, what rate describes my actual earnings? Two accounts with the same nominal rate but different compounding have different APYs, and the higher APY pays more. The difference is small at ordinary rates, but it is real money on a large balance held for years.
The frequency table makes the premium visible. The same 4.8% nominal rate is a 4.80% APY compounded annually, 4.89% quarterly, 4.91% monthly and 4.92% daily. Moving from annual to monthly compounding is worth about 11 basis points; moving from monthly to daily is worth about 1. Frequency is a tiebreaker, not a reason to choose an account.
Use APY only for comparing deposit accounts with each other. For loans, the equivalent comparison figure is APR, which goes further and folds in fees but does not compound. Comparing a loan's APR with a savings account's APY is a common and misleading shortcut — they measure different things, and the reverse mode exists precisely to put them on the same footing.
Remember the APY is a snapshot with conditions attached. On a variable-rate savings account the bank can change the rate at any time, and the APY follows; on a CD the APY is fixed for the term. APY also assumes the balance stays in the account for a full year and that all interest stays and compounds — withdrawals, a part-year balance or a tiered rate all reduce what you actually receive.
The formula
APY = (1 + r/n)^n − 1, where r is the nominal annual rate and n the number of compounding periods per year. Reverse: APR = n × ((1 + APY)^(1/n) − 1).
Worked example — try it on the calculator above
Worked example: 4.8% nominal, compounded monthly
Divide 4.8% by 12 to get 0.4% per month. Compound it 12 times: (1.004)^12 − 1 = 4.907%, so the APY is 4.91%. On a $25,000 balance held a full year, that is about $1,227 of interest rather than the $1,200 the nominal rate suggests. Run the reverse mode on a 4.91% APY and you get back an equivalent 4.80% nominal rate. Hold the full $25,000 for 5 years at that APY and the balance reaches about $31,766, with monthly compounding adding roughly $766 beyond what simple interest at 4.8% would pay.
Frequently Asked Questions
What is the difference between APR and APY?
APY describes what a deposit earns, including compounding. APR describes what a loan costs, including most fees, but it does not compound. Comparing a loan's APR with a savings account's APY is a common and misleading shortcut — use this calculator's reverse mode to put both on a nominal footing first.
Can APY change after I open the account?
On a variable-rate savings account, yes — the bank can change the rate at any time, and the APY follows. On a CD, the APY is fixed for the term. The APY quoted at opening is a snapshot, not a promise, for variable accounts, which is why high-yield rates moved with the Fed's September 2026 rate rise.
Why is my interest payment lower than the APY suggests?
APY assumes the balance stays in the account for a full year and that all interest stays and compounds. Withdrawals, a balance that was present for only part of the period, or a tiered rate on part of the balance all reduce what you actually receive. Check the statement period before concluding the bank paid short.
Do all banks have to disclose APY?
In the US, yes. The Truth in Savings Act requires banks to disclose the APY for deposit accounts in a standard format, which is what makes cross-bank comparison possible. Credit unions follow the same rule through the NCUA, so a credit union APY and a bank APY are directly comparable.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.