APR ↔ APY Converter
Convert between nominal APR and effective APY for any compounding frequency.
APR vs APY: small words, big difference
APR is the nominal annual rate — the simple percentage, ignoring compounding. APY (or EAR, Effective Annual Rate) includes compounding, so it's what you actually earn or pay per year. On a 6% loan compounded monthly, the APR is 6% but the APY is 6.17%. The gap widens with more frequent compounding.
The quoting convention tells you who benefits from which: lenders quote APR (makes borrowing look cheaper), savers quote APY (makes earnings look higher). When comparing across products, always normalize to APY for apples-to-apples.
Frequently asked questions
What's the difference between APR and APY?
APR is the nominal annual rate, ignoring compounding. APY (Annual Percentage Yield) folds in compounding — it's what the account actually earns or costs per year. A 6% APR compounded monthly equals a 6.17% APY. Loans quote APR (it looks lower); savings accounts quote APY (it looks higher); both sides are using whichever number is more flattering.
How do I convert between them?
APY = (1 + APR/n)^n − 1, where n is the number of compounding periods per year (12 for monthly, 365 for daily). This calculator does the conversion both ways. The more frequent the compounding, the bigger the gap between APR and APY.
Why does APR vs APY matter for credit cards?
Credit cards quote APR but actually compound daily. A 24% APR credit card is really a 27% APY — that's 3 percentage points of invisible cost if you carry a balance. On $5,000 of debt, that's $150/year of 'hidden' interest you weren't quoted.
Which number should I use for comparison?
Always compare like-for-like: APY to APY for savings products, APR to APR for loans. Make sure both products compound the same way (daily, monthly, etc.), or normalize them both to APY for apples-to-apples.
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