Finance
What Is APY (Annual Percentage Yield)?
APY is the real yearly return on savings or investments including compound interest, making it higher than the nominal rate.
APY (Annual Percentage Yield) states what money actually earns in a year once compounding is included. A savings account paying a 5% nominal rate compounded monthly has an APY of about 5.12% — the extra 0.12% is interest earned on interest during the year.
Banks typically advertise APY for savings products (the bigger number) and APR for loans (the smaller number). When comparing offers, always compare like with like.