APY shows how much your savings could grow in a year when interest compounds. It is the clearest number to compare savings products, because it includes the effect of earning interest on interest, not just the headline rate.

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What is APY?

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Annual Percentage Yield (APY) is the yearly return on a savings balance, assuming interest is left in the account and compounds according to the account’s schedule (for example weekly or monthly). A 2% APY means that, over a full year, €1,000 could grow by roughly €20 if the rate stayed the same and you did not withdraw.

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APY is different from a simple annual interest rate. A simple rate only applies to your original deposit. APY accounts for compound interest, which is why two accounts with the same nominal rate can grow at different speeds if they compound at different frequencies.

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APY vs interest rate

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Banks sometimes advertise an “interest rate” and separately mention APY. When compounding is frequent, APY is slightly higher than the base rate. When comparing Savings Accounts or Term Deposits, use APY (or the fixed rate for a locked term) so you are comparing like with like.

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What affects your real return

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Your actual return also depends on how much you save, how long you leave money in place, and whether the rate changes. Variable savings rates can move when the ECB or your bank adjusts pricing. Fixed-term products lock a rate for the agreed period.

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Remember that interest may be subject to tax on savings interest where you live. APY describes growth before tax, not your net result after filing.

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Common questions

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Is a higher APY always better?

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Usually, yes, for the same type of account and access rules. Also check withdrawal limits, minimum balances, and whether the rate is fixed or variable.

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Does APY apply to investments or crypto?

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APY is a savings term. Investments and crypto do not offer a guaranteed APY; their returns depend on market prices and can go down as well as up.