APY (annual percentage yield)

APY (annual percentage yield) is the percentage a deposit earns in a year, counting compounding: the figure banks must quote for savings accounts, money market accounts and CDs.

Regulation DD requires banks and credit unions to state APY, so accounts that compound differently can be compared directly. The same interest rate gives a higher APY the more often it compounds.

APY = (1 + r/n)^n − 1, where r is the yearly rate and n the number of times it compounds a year. Savings APYs are variable; a CD's is fixed for its term.

Sources: CFPB: Regulation DD, Appendix A (annual percentage yield)