APR vs APY Calculator
Convert between APR (nominal rate) and APY (effective yield with compounding) for any compounding frequency. Educational. Runs in your browser.
APR is the nominal rate; APY (or EAR) includes the effect of compounding: APY = (1 + APR/n)^n − 1. The more frequently interest compounds, the higher the APY for the same APR. Savings accounts advertise APY (looks higher); loans advertise APR (looks lower, but loan APR also rolls in fees). Compare savings on APY and loans on APR. Educational.
About this tool
APR and APY describe the same interest rate from two angles, and confusing them costs people money. APR (annual percentage rate) is the nominal rate without the effect of compounding within the year. APY (annual percentage yield, also called the effective annual rate) includes compounding: APY = (1 + APR ÷ n)^n − 1, where n is the number of compounding periods per year. This calculator converts either way for any frequency from annual to continuous. The key insight it demonstrates is that the more frequently interest compounds, the higher the APY for the same APR — 6% APR compounded monthly is about 6.17% APY, daily slightly more. That is why the marketing differs by product: savings accounts and CDs advertise APY because compounding makes the number look bigger and better, while loans and credit cards advertise APR because it looks smaller (though loan APR also bundles in certain fees, which is a separate effect). The rule of thumb: compare savings products on APY and borrowing products on APR, and convert when you need an apples-to-apples view. It is educational. Everything runs in your browser.
How to use it
- Choose APR → APY or APY → APR.
- Enter the rate.
- Select the compounding frequency.
- Read the converted rate; compare savings on APY and loans on APR.
Frequently asked questions
- What is the difference between APR and APY?
- APR is the nominal annual rate without intra-year compounding; APY (or EAR) is the effective rate including compounding. APY = (1 + APR/n)^n − 1. For the same APR, more frequent compounding gives a higher APY.
- Why do savings accounts show APY and loans show APR?
- Marketing. Compounding makes APY larger than APR, so savings products advertise APY to look more rewarding. Loans advertise APR, which looks smaller — though loan APR also incorporates certain fees, a different adjustment that can make it larger than the note rate.
- How much does compounding frequency matter?
- More than people expect at high rates, less at low ones. At 6% APR, monthly compounding yields about 6.17% APY and daily about 6.18%; at 20% the gap is larger. Continuous compounding is the theoretical maximum (e^rate − 1).
- Which should I use to compare options?
- Compare savings/investment products on APY (the true yield you earn) and borrowing products on APR (the standardized cost including fees). Converting both to the same basis with this tool removes the marketing distortion.
- Is loan APR the same as the interest rate?
- Not exactly. Loan APR includes the interest rate plus certain required fees (points, origination), so it is usually slightly higher than the note rate and is meant to make loan offers comparable. This tool converts between nominal rate and effective yield; loan APR's fee component is separate.
- Is anything uploaded?
- No. The conversion runs entirely in your browser.