Financial Tools

Compound Interest Converter

Compare or convert interest rates of different compounding periods. Easily convert between APR and APY or other frequencies.

Input Rate

Interest Rate (%)

Compounding (From)

Target Conversion

Compounding (To)

Values shown are examples. Edit them to match your situation.

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Conversion Result

Output Interest Rate

This calculation shows the equivalent interest rate when changing the compounding frequency while keeping the effective annual yield the same.

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For illustration only, not financial advice. Results are estimates based on the numbers you enter and do not constitute an offer, rate quote or approval.

Now compare real accounts on the same basis.

Live APYs from banks and credit unions, already stated as effective annual yield.

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How this is worked out

Two rates are only comparable when they compound the same way. Everything here routes through the effective annual rate: EAR = (1 + r/n)^n minus 1 for n periods a year, and EAR = e^r minus 1 when compounding is continuous. The input rate is converted to EAR, then EAR is converted back out at the frequency you chose.

That is why 12% compounded monthly is not 12% compounded annually. Monthly gives an EAR of 12.6825%, and a bank quoting one against the other is comparing nothing.

APY is EAR by another name, which is why deposit accounts in the United States are required to quote it: it is the only figure that makes two accounts comparable (12 CFR 1030, Regulation DD).

Questions people ask

What is the difference between APR and APY?

APR is the nominal rate with no compounding applied. APY, the same thing as the effective annual rate, includes it. On a savings account the APY is higher than the nominal rate; the gap widens the more often interest is credited.

Does more frequent compounding always pay more?

Yes, but with sharply diminishing returns. Going from annual to monthly is worth far more than going from daily to continuous, which is usually a rounding difference.

Which figure should I compare two savings accounts on?

The APY. United States deposit accounts have to quote it under Truth in Savings, and it already contains the compounding frequency, so no conversion is needed.

Why would a lender quote a nominal rate instead?

Because it is the smaller number. On borrowing, the effective rate is always the higher one, so the nominal rate is the flattering way to state it.

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