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What is APY?

APY is the yearly yield on a deposit, including compounding. Here is how to read it, and why a headline rate is not the whole offer.

Last reviewed Oct 30, 2026. Written by New Bank Account.

APY means annual percentage yield. It is the number that lets you compare deposit accounts on equal terms. The interest rate alone does not do that, because it ignores how often interest is added back to the balance.

The definition that matters

Under Regulation DD, the Truth in Savings rule, annual percentage yield is a percentage rate that reflects the total amount of interest paid on an account, based on the interest rate and the frequency of compounding for a 365-day period (12 CFR 1030.2). You do not need to calculate it yourself. Banks have to disclose it. Your job is to read which balance it applies to.

The Consumer Financial Protection Bureau's bank-account guide is the plain-language companion if the regulation is more than you want (CFPB).

Why the homepage number is not the offer

A rate on a homepage can apply only above a balance, only for a few months, or only if a direct deposit lands each month. Those conditions live in the account disclosure. Read them before you move money. Two accounts with the same APY are not the same offer if one pays it on every dollar and the other pays it only above $10,000, or only when you jump through a hoop.

A fee can beat the interest

Interest on a modest balance is often a few dollars a month. A monthly fee, an out-of-network ATM fee, or a paper-statement fee can be larger than that. Compare the fee schedule and the APY together. If either number is blank on our cards, we have not verified it. We do not fill the blank with a number from an ad.

How to read an offer in five checks

  1. Find the APY, not only the interest rate.
  2. Find the balance it applies to.
  3. Find what you must do to earn it.
  4. Find the monthly fee, and what waives it.
  5. Check the date. Variable rates move.

If you are choosing a savings account, start at high-yield savers and then open each provider's page. For the insurance question that sits next to a high balance, read how FDIC insurance works.

Questions people ask

Is APY the same as the interest rate?
No. The interest rate is the rate the account pays. APY folds in how often that interest compounds over a 365-day period, so it is the better number for comparing deposit accounts.
Does a higher APY always mean I earn more?
Only on the balance the APY actually applies to, and only if you meet the conditions. A monthly fee can erase the interest on a small balance.
Why do savings rates change?
Most consumer savings rates are variable. The bank can change them. The date on the disclosure matters as much as the number.
Where should I confirm the APY?
On the provider's own account disclosure, not on an ad or a comparison card that does not link to that page.

Sources

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