What Is the Difference Between APY and APR?
APR (Annual Percentage Rate) is the simple annual interest rate without compounding. It represents the basic cost of borrowing or the nominal return on an investment.
APY (Annual Percentage Yield) is the actual annual return or cost with compounding. It reflects the effect of compound interest on a loan or investment over a year.
The Key Difference
| Feature | APR | APY |
|---|---|---|
| Includes Compounding? | No | Yes |
| Used For | Loans, mortgages, credit cards | Savings accounts, investments |
| True Cost/Return | Lower (understates true cost) | Higher (reflects true cost) |
| Compounding Effect | Not included | Fully included |
How the APY vs APR Calculator Works
This apr to apy calculator and apy to apr calculator converts between the two rates using standard financial formulas:
APR → APY
APY = (1 + APR ÷ n)^n − 1
Where n = number of compounding periods per year
APY → APR
APR = n × ((1 + APY)^(1/n) − 1)
Where n = number of compounding periods per year
APY vs APR Comparison Table
| Compounding Frequency | APR | APY | Difference |
|---|---|---|---|
| Annually | 6.00% | 6.00% | 0.00% |
| Semi-Annually | 6.00% | 6.09% | +0.09% |
| Quarterly | 6.00% | 6.14% | +0.14% |
| Monthly | 6.00% | 6.17% | +0.17% |
| Weekly | 6.00% | 6.18% | +0.18% |
| Daily | 6.00% | 6.18% | +0.18% |
Who Benefits from the APY vs APR Calculator?
This apy apr converter is designed for:
- Investors comparing savings account yields
- Borrowers understanding the true cost of loans
- Financial analysts evaluating investment returns
- Anyone comparing APY vs APR for financial decisions
- Students learning the apr to apy formula
Frequently Asked Questions
What is the difference between APY and APR?
APR is the simple annual interest rate without compounding. APY includes the effect of compounding, showing the actual return or cost over a year.
How do I convert APR to APY?
APY = (1 + APR ÷ n)^n − 1, where n is the number of compounding periods per year. For example, 6% APR compounded monthly = 6.17% APY.
How do I convert APY to APR?
APR = n × ((1 + APY)^(1/n) − 1), where n is the number of compounding periods per year.
Why is APY higher than APR?
APY is higher because it includes the effect of compounding — interest earned on interest. The more frequently interest compounds, the larger the difference.
What is the formula for APR to APY conversion?
The formula is: APY = (1 + APR ÷ n)^n − 1, where n is the number of compounding periods per year.
Is my data stored anywhere?
No. All calculations run locally in your browser. No data is sent to any server.