The same APR produces a slightly higher APY when interest compounds daily instead of monthly, because more frequent compounding adds interest to the balance sooner. The difference is usually small at ordinary rates, but it matters when comparing products that quote APR while using different compounding schedules. The APR to APY calculator converts the rate using a selected frequency so you can compare the assumptions on the same annual basis.
What daily and monthly compounding change
APR is the nominal annual rate. It does not by itself tell you how often earned interest is added to the balance. APY expresses the annual result after compounding under a specified convention. The Consumer Financial Protection Bureau defines APY for deposit accounts by reference to the interest rate and compounding frequency over a 365-day period; the exact product terms still matter when comparing real offers.
For a nominal APR r written as a decimal and n compounding periods per year, the common effective annual conversion is:
APY = (1 + r / n)^n − 1
For monthly compounding, use n = 12; for daily compounding, use n = 365 in this calculator. More periods make the result approach continuous compounding, but the increase is not unlimited. It is also not the same thing as a provider paying a higher stated APR: it is the effect of applying the same nominal rate more often.
The tool supports APR-to-APY and APY-to-APR directions and daily, weekly, monthly, or continuous frequencies. In its APR-to-APY direction, it calculates the effective rate from the selected frequency. It does not check whether an account, exchange, staking protocol, or lending product actually credits rewards at that cadence. It also does not include fees, taxes, balance caps, variable rates, or deposit timing.
Worked example: 5% APR for a one-year comparison
Assume two hypothetical products both state 5% APR, with one compounding monthly and the other daily. The rate is 0.05 in the formula.
monthly APY = (1 + 0.05 / 12)^12 − 1
= 0.0511618979… = 5.11619…%
daily APY = (1 + 0.05 / 365)^365 − 1
= 0.0512674965… = 5.12675…%
Daily compounding is higher by about 0.01056 percentage points of APY. On a hypothetical $10,000 balance held for one year at those unchanged rates, with no fees and no additional deposits:
monthly ending balance = $10,000 × (1 + 0.0511618979…) = $10,511.62
daily ending balance = $10,000 × (1 + 0.0512674965…) = $10,512.67
difference = about $1.06
The example illustrates why a more frequent schedule can produce a higher effective annual yield without changing APR. The difference here is modest because the APR and principal are modest. A larger balance, a longer horizon, or a different APR changes the currency difference, but the formulas still depend on the same rate and frequency assumptions.
To reproduce the rate conversion, use the calculator, choose APR to APY, enter 5, and compare monthly with daily. The output is an annual percentage. The balance multiplication above is a separate illustration of what those APYs mean for a fixed one-year principal; it is not an additional output the APR/APY tool promises to calculate.
How to compare two real offers fairly
First confirm whether each advertised number is APR or APY. Do not convert a quoted APY as if it were nominal APR; that can count compounding twice. If both products quote APR, use the frequency each contract actually applies. If one quotes APY, compare that effective rate directly, then inspect whether fees, eligibility rules, or rate changes affect what you receive.
Next compare the time basis and assumptions. A daily-compounded fixed rate and a monthly-compounded variable rate do not differ only by frequency. If a crypto platform can change its rate, its displayed yield may not persist for a full year. The calculation here holds the APR constant and assumes credited interest remains in the balance to compound. It does not predict future yield or the amount ultimately withdrawable.
For staking scenarios, the staking rewards calculator applies a selected APR or APY to a token principal over a chosen period and can show a separate token-price scenario. Its output is still conditional on the rate and reward assumptions you enter. For spot trades, the crypto profit calculator handles buy and sell fee assumptions instead of annual compounding. Do not compare outputs from those different models as though they were identical return measures.
Common mistakes
- Comparing APR from one offer with APY from another. Convert them to the same effective annual basis before comparing, while checking the underlying terms.
- Using the wrong frequency. Select the schedule stated in the terms, not the schedule that produces the more appealing number.
- Entering
5as a decimal rate. The calculator takes a percent input, so enter5for 5%; it converts the percentage internally. - Assuming daily compounding means daily payment. Compounding frequency describes when credited earnings affect the balance in the model. A product may calculate, credit, or display earnings on a different schedule.
- Treating the APY as fixed for the next year. A variable rate can change, making the annualized comparison differ from realized results.
- Ignoring fees and eligibility. A higher APY may not mean a higher net return after product fees, thresholds, conditions, or taxes that are outside the formula.
FAQ
Which is higher at the same positive APR: daily or monthly APY?
Daily compounding produces a slightly higher APY because interest is included in the balance more often. The size of the difference depends on the APR.
Why is the difference small in the example?
Monthly and daily schedules are both frequent over a year, so their effective rates are close at 5% APR. The added compounding benefit is not another full 5% return.
Does APY mean the rate is guaranteed?
No. APY describes an annualized result under stated assumptions. Product terms may allow rates to change, and crypto reward rates can vary.
Can I compare a crypto staking APY with a bank APY directly?
You can compare the annualized percentages as arithmetic, but the products can differ in rate variability, fees, risks, liquidity, and the meaning of credited rewards. Read each product's terms.
Does this calculator include fees or taxes?
No. It converts APR and APY using the selected compounding frequency. Fees, taxes, variable rates, and additional deposits are outside the calculation.
Not financial advice. This is an interest-rate comparison, not a recommendation to use any product.