APR to APY Calculator
APR (Annual Percentage Rate) is the nominal rate before compounding effects. APY (Annual Percentage Yield) is the effective annual rate after compounding, and is always higher than APR. The conversion formula is APY = (1 + APR/n)^n - 1, where n is the number of compounding periods per year. Use this calculator to understand the true cost of borrowing or the true return on savings, and to compare products that use different compounding conventions.
APR to APY conversion formula
APY = (1 + APR/n)^n - 1
Where APR is the annual percentage rate (as a decimal), n is the number of compounding periods per year. The effective rate difference is APY - APR. For continuous compounding the formula becomes APY = e^(APR) - 1, though most US lenders use discrete compounding.
When APR and APY are disclosed
Under Regulation Z (12 CFR Part 1026), implemented by the CFPB under the Truth in Lending Act, all consumer lenders must disclose the APR on loans and credit cards. Under Regulation DD (12 CFR Part 1030), banks must disclose the APY on savings and deposit accounts. Because these two figures use different conventions, comparing a loan's APR to a savings account's APY is an apples-to-apples comparison once you convert with the formula above.
Frequently asked questions
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the stated annual rate without accounting for compounding within the year. APY (Annual Percentage Yield) is the effective annual rate after accounting for intra-year compounding. APY is always greater than or equal to APR.
Why does compounding frequency matter?
More frequent compounding means interest accrues on previously accrued interest sooner. Daily compounding (365 periods) produces a slightly higher effective rate than monthly compounding (12 periods) on the same APR.
Which institutions use APY versus APR?
Under Regulation Z (Truth in Lending), lenders must disclose APR for loans and credit cards. Under Regulation DD (Truth in Savings), deposit accounts must disclose APY. This makes loan rates appear lower and savings rates appear higher when comparing without adjustment.
How is APY calculated?
APY = (1 + APR/n)^n - 1, where n is the number of compounding periods per year. For monthly compounding (n=12) on a 12% APR: APY = (1 + 0.12/12)^12 - 1 = 12.68%.
Does the CFPB regulate APR and APY disclosures?
Yes. The CFPB enforces Regulation Z for loan disclosures and Regulation DD for deposit account disclosures. Both regulations are part of the Truth in Lending Act and Truth in Savings Act respectively.
Official sources
- CFPB Regulation Z (Truth in Lending): 12 CFR Part 1026.
- CFPB Regulation DD (Truth in Savings): 12 CFR Part 1030.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.