APY Calculator
Convert APR to annual percentage yield, project your balance, and see the after-tax return
APY Calculator
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Based on your results — what to do next:
Lock in this yield with a CD
4.602% APY on a savings account is variable — compare it to a fixed-term CD before rates move.
Are you beating inflation?
Your after-tax yield is 3.498%. If inflation runs higher, this balance is losing real purchasing power.
How much should sit in savings?
$11,445 earning 4.602% is great for a cash buffer — size the buffer, then invest the surplus.
APY (Annual Percentage Yield) is the true annual return on a deposit account once compounding is counted. A 4.50% APR compounded daily produces a 4.602% APY — the number banks advertise, and the only one you should use to compare accounts. This calculator converts APR to APY at six compounding frequencies, projects your balance with monthly contributions, and does what most APY tools skip: shows the after-tax yield, since savings interest is taxed as ordinary income at your top bracket.
How APY Is Calculated
A nominal rate alone is incomplete: 4.50% credited once a year is not the same as 4.50% credited daily, because in the second case the interest itself starts earning interest. APY collapses both facts — rate and frequency — into one comparable annual figure.
| Variable | Definition |
|---|---|
| r | Nominal annual interest rate (APR), as a decimal |
| n | Compounding periods per year — 1, 2, 4, 12, 52, or 365 |
| APY | Effective annual yield after compounding, as a decimal |
Worked example: a 4.50% APR compounded daily. r = 0.045, n = 365. APY = (1 + 0.045 ÷ 365)365 − 1 = (1.00012329)365 − 1 = 0.04602, or 4.602%. On a $10,000 balance that is $460.25 in the first year, versus $450.00 with simple annual crediting — an extra $10.25 purely from compounding frequency.
The same 4.50% APR at other frequencies: annually 4.500%, semi-annually 4.551%, quarterly 4.577%, monthly 4.594%, daily 4.602%, and continuously 4.603% (the theoretical ceiling, er − 1). Note how tightly these cluster — which is exactly why the headline rate matters far more than the compounding schedule.
💡 Expert Pro-Tip
Chase the Rate, Not the Compounding — and Watch the After-Tax Number: Banks market "daily compounding" as a feature, but the gap between daily and monthly on a 4.50% APR is about $0.80 per $1,000 per year. Meanwhile the difference between a 4.60% online savings account and a 0.42% national-average big-bank account is roughly $418 per $10,000 per year. There is one more layer people miss: savings interest is taxed as ordinary income, so a 4.60% APY in a 24% bracket is really 3.50% net — and in a 5% state income tax jurisdiction, closer to 3.27%. If inflation is running near 3%, that account is barely holding its purchasing power, which is a strong argument for keeping only your emergency fund in cash and investing the rest.
APY Calculator FAQ
What is the difference between APR and APY?
APR is the simple annual rate before compounding; APY is the effective rate after compounding. APY is always greater than or equal to APR, and they are equal only when interest compounds exactly once per year. Banks quote APY on savings and CDs because it is the larger number, and APR on credit cards and loans because it is the smaller one. Always compare like with like.
Is APY guaranteed?
On a CD, yes — the rate is locked for the term. On a high-yield savings or money market account, no: the APY is variable and the bank can change it at any time, usually within days of a Federal Reserve rate move. If you expect rates to fall and want certainty, a CD locks your yield; if you expect them to rise, staying liquid in savings lets you capture the increase.
How is savings interest taxed?
As ordinary income at your marginal federal bracket, plus state income tax where it applies. Any account paying $10 or more of interest in a year generates a Form 1099-INT, and the IRS receives a copy. One exception worth knowing: Treasury bills and notes are exempt from state and local tax, which can make a slightly lower Treasury yield beat a higher bank APY in high-tax states.
Does compounding frequency actually matter?
Almost never enough to drive a decision. At a 4.50% APR, the spread from annual to daily compounding is about 0.10 percentage points — roughly $10 per $10,000 per year. The headline rate is 25 to 50 times more important. Treat "compounds daily" as a marketing detail rather than a differentiator.
Can APY be used for loans?
The same math applies but the terminology flips. On borrowing, the compounded equivalent is called the effective annual rate (EAR). A credit card advertising 24.99% APR compounded daily has an EAR near 28.4% — which is why revolving balances grow faster than the quoted rate suggests. See the credit card calculator for the payoff math.
What is a good APY in 2026?
Compare any offer against the current federal funds rate and short-term Treasury yields — competitive online savings accounts generally track close to them, while the national average at large brick-and-mortar banks lags far behind. The gap between a top-tier online account and a legacy savings account has often exceeded four percentage points in recent years, which is the single easiest yield improvement available to most savers.