Convert between APR (nominal rate) and APY (effective annual yield) for any compounding frequency. See the real effect of compounding.
APR is the stated nominal rate. APY (also called the effective annual rate) includes the effect of compounding within the year, so it is the true yearly growth. The more often interest compounds, the more APY exceeds APR.
APR is the nominal yearly rate without compounding. APY (effective annual rate) folds in how often interest compounds during the year, so it shows the real growth. For savings, a higher APY is better; for loans, a lower APR is better.
Each time interest compounds, the next period earns interest on the interest. More frequent compounding (daily versus annually) produces a slightly higher effective yield, which is the APY.
Compare like with like. For savings accounts compare APY, since it reflects true earnings. For loans and credit cards, lenders usually quote APR. This tool converts between them so you can compare fairly.