APY & APR Converter
Need to know how to convert APR to APY, or how to convert APY to APR?
Use this calculator to quickly convert from one to the other. The difference between APY and APR is simple; however, there's no consistency between institutions as to which one is used and with this inconsistency comes confusion. APY includes compounding and APR does not. So, institutions that are trying to get you to invest your money generally report APY (think Banks selling CD's or promoting their money market account) whereas institutions lending you money generally report APR (think credit card companies).
Now for example - if you invest $10,000 into a money market account that has a 4% APY the APR is actually 3.93% when interest is compounded monthly. So, at end of the first month your account will be credited with $33 of interest (.0393/12*10,000). At the end of the second month, you'll earn interest on the interest paid the previous month, and each month thereafter the interest will build, until after 12 months when the total interest earned will be $400 (that's where the 4% APY comes in). The yield is the total that you get, with compounding, based on the annual percentage rate.
Now you know, and have a handy calculator to keep in your "back pocket" for the next time someone tries to confuse you with APY or APR.
See how we used this calculator to evaluate the return we were getting on our emergency fund, and came up with alternative investments to improve our return by 20%. Read our blog on Building your Emergency Fund and Maximizing its Returns here or download our Emergency Fund Analyzer here.
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* Note, utilizing the features of this excel template requires Microsoft Excel® 2007 or later - some of the attributes such as the graded shading, tables, or 3-D formatting are not compatible with earlier versions.