The effective annual return on savings or investments accounting for compound interest.
Annual Percentage Yield (APY) represents the total return you earn on a savings account, money market account, or CD over one year, including the effect of compound interest. APY is always equal to or higher than the stated interest rate because it factors in how often interest compounds. For example, a savings account earning 4% annual interest compounded daily will have a slightly higher APY than 4% due to the compounding effect. Banks and financial institutions must disclose APY to help consumers compare savings products. APY is the standard way to compare the true earning power of different savings vehicles.