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APY Calculator

Convert nominal interest rate (APR) to Annual Percentage Yield (APY) across daily, monthly, quarterly, and annual compounding. Compare savings accounts on an apples-to-apples basis.

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APR to APY conversion4 compounding frequenciesFormula verified July 2026
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حل شدہ مثالیں

UAE bank fixed deposit: 5.25% p.a., monthly compounding

APY = (1 + 0.0525/12)^12 - 1 = 5.368%. On AED 100,000: nominal interest = AED 5,250; actual interest with monthly compounding = AED 5,368. The compounding adds AED 118.

Compare daily vs monthly compounding at 5%

Monthly: APY = (1 + 0.05/12)^12 - 1 = 5.116%. Daily: APY = (1 + 0.05/365)^365 - 1 = 5.127%. Difference: 0.011 percentage points. On AED 1,000,000, daily compounding earns approximately AED 110 more per year than monthly. The rate matters far more than compounding frequency.

Credit card: 24% APR, daily compounding

APY = (1 + 0.24/365)^365 - 1 = 27.11%. A credit card advertised as 24% per year actually costs 27.11% effective annual rate due to daily compounding on unpaid balances. The 3.11 percentage point difference on AED 50,000 of unpaid debt = AED 1,555 extra interest per year.

اکثر پوچھے گئے سوالات

~4 min read
What is the difference between APR and APY?▾
APR (Annual Percentage Rate) is the nominal interest rate stated without accounting for the effect of compounding within the year. APY (Annual Percentage Yield) — also called EAR (Effective Annual Rate) — is the actual yield you earn or pay over a year, accounting for how often interest compounds. At any compounding frequency greater than annual, APY is always greater than APR.
What is the APY formula?▾
APY = (1 + r/n)^n - 1, where r is the nominal annual rate (as a decimal) and n is the number of compounding periods per year. For daily compounding at 5% APR: APY = (1 + 0.05/365)^365 - 1 = 5.127%. For continuous compounding: APY = e^r - 1 = e^0.05 - 1 = 5.127% — practically identical to daily compounding at typical rates.
Why do banks advertise APR instead of APY?▾
For deposits, banks advertise the lower APR because it makes the rate look competitive while understating the true yield. For loans and credit cards, banks also advertise APR for the same reason — the effective cost (APY) is higher. In the UAE, the Central Bank of UAE (CBUAE) requires lenders to disclose the reducing balance rate for consumer loans, but savings product advertising often still uses nominal rates.
How does compounding frequency affect long-term savings?▾
The difference between daily and monthly compounding is modest (0.01-0.05 percentage points at typical rates). Moving from annual to monthly compounding at 5% over 30 years on AED 100,000: annual compounding gives AED 432,194; monthly compounding gives AED 448,114 — a AED 15,920 (3.7%) difference. The rate itself and the time horizon matter far more.
What APY are UAE banks currently offering?▾
UAE bank deposit rates vary by bank and product. As of July 2026, UAE dirham savings accounts offer approximately 1-2.5% APR; fixed deposits (1-year term) range from approximately 4-5.5% APR. AED rates are influenced by the US Federal Reserve due to the AED/USD peg. Always compare APY (not just APR) when evaluating deposit products.
What is continuous compounding?▾
Continuous compounding is the mathematical limit of compounding as the frequency approaches infinity. The formula is APY = e^r - 1, where e is Euler's number (approximately 2.71828). At r = 5%, continuous compounding gives APY = e^0.05 - 1 = 5.127%. This is almost identical to daily compounding — the practical difference is negligible for all financial planning purposes.
How do I compare savings accounts with different compounding frequencies?▾
Always convert to APY before comparing. Account A: 5.20% APR, compounded quarterly, gives APY = (1 + 0.052/4)^4 - 1 = 5.307%. Account B: 5.10% APR, compounded daily, gives APY = 5.231%. Account A wins despite quarterly compounding because its nominal rate is higher. Never compare APR across different compounding frequencies — only APY is directly comparable.
Does APY include fees?▾
Standard APY does not include fees. Some savings accounts charge monthly maintenance fees, minimum balance fees, or early withdrawal penalties on fixed deposits, which reduce the effective yield below the stated APY. The true net yield after fees = APY - (annual fees / average balance). Always check for fees when comparing deposit products.

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Interest rates used in examples are illustrative. Current UAE bank rates vary — verify with your bank before making deposit decisions. APY does not include fees.

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