APY (Annual Percentage Yield)
The real yearly return on savings, including compounding. Unlike a plain interest rate, APY tells you what $10,000 actually becomes after one year.
By Findley's Finance · Last reviewed: September 2026
Why it matters
APY is the mirror image of APR: APR measures what borrowing costs you, APY measures what saving earns you. Banks advertise APY because compounding makes it slightly higher than the headline rate — a 4% rate compounded monthly is about 4.07% APY. When comparing savings accounts, APY is the only number that matters; everything else is marketing.
Concrete example
$10,000 in an account at 4% APY becomes $10,400 after one year, with no deposits or withdrawals.