What is an APY and How Does It Work?

APY can give you an idea of how much you could earn in a year from a savings deposit.
APY, meaning Annual Percentage Yield, is the rate of interest earned on a savings or investment account in one year, and it includes compound interest. To help people compare accounts and get an accurate estimate of possible earnings, banks are required to prominently display account APYs.
Since APY tells you how much interest you earn on a deposit account over a single year, its accuracy depends on the account owner not adding or withdrawing any money from the account. So when you use APY to see how much interest an account will accrue, it’s important that you take your own account usage into consideration.