The good news is, you don’t have to understand the formula to take advantage of it—banks are required to display the APY on their deposit products for consumers to see.

What Is APY (Annual Percentage Yield)? APY, or annual percentage yield, is an important figure used in the banking world to explain how much interest you’ll earn on savings account deposits.

APY, or annual percentage yield, is an essential factor when choosing a savings account, as it considers compound interest and helps maximize your savings over time.

People often use APY and interest rate interchangeably, but they're different. Interest rate is a part of the APY formula, but APY also takes into account how often your savings compounds.

What is APY, and why does it matter? Learn about the annual percentage yield, how it works, and what it means for your finances.

How annual percentage yield works APY standardizes a rate of return by using a formula that combines the interest rate and the number of times interest compounds in a given year.

How to Calculate Annual Percentage Yield As mentioned above, the formula for APY is generally the same as the formula for EAR. To calculate APY, follow this equation: APY = (1+r/n)n-1 r = the period ...