If you are thinking about opening a savings account, it is important to know about APY.
The term “Annual Percentage Yield” (APY) plays an important part in your finances. APY refers to the percentage of interest you earn on your credit union or bank accounts. Let’s take a look at what you should know about APY.
1. What is APY?
APY uses compound interest to calculate the return on your interest-earning accounts. Depending on the account, the interest could compound daily, monthly, or annually. Compound interest is the interest added to your principal balance. Let’s say you earn $7 on your $20,000 balance this month. Next month you’ll earn interest on $20,007.
2. APY vs APR
The terms annual percentage yield (APY) and annual percentage rate (APR) seem similar, but they are different. You can think of it this way: APY refers to the interest you earn, and APR refers to the interest you pay.
3. APY variables
Depending on what type of savings account you have, APY can vary. If you have a regular savings account, the APY will fluctuate based on the market. If you have a share certificate or CD, the rate will stay the same as when you purchased it.
4. Why APY matters to you
APY matters because the more money you have saved, the more money you can earn. Compound interest might seem small, but it adds up over time. So, when shopping for a savings account, be sure to find the best APY available. Check our savings rates.
Earn a higher return on your savings and explore our Traditional, Bump-Up, and Jumbo Certificate options! If you want access to your money during your term, then learn about our Money Market Accounts.
