APR Bank Account Calculator
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Reviewed by Calculator Editorial Team
Understanding the Annual Percentage Rate (APR) is crucial when comparing bank accounts. This calculator helps you determine the APR for your bank account based on the interest earned and the average daily balance.
What is APR?
The Annual Percentage Rate (APR) is the yearly cost of borrowing or the yearly interest rate on a savings account. It represents the actual cost of credit, taking into account the timing of payments and compounding of interest.
APR is different from the Annual Percentage Yield (APY), which accounts for compounding interest. APR is typically used for loans and credit cards, while APY is more common for savings accounts.
How to Calculate APR
The formula to calculate APR is:
Where:
- Interest Earned is the total interest earned during the period.
- Average Daily Balance is the average amount of money in the account during the period.
For example, if you earned $100 in interest on an average daily balance of $5,000 over a year:
APR vs. APY
APR and APY are often confused, but they measure different things:
- APR is the simple interest rate, not accounting for compounding.
- APY is the effective annual rate, accounting for compounding interest.
For example, if an account offers a 1% APR compounded monthly, the APY would be approximately 1.04% because of the compounding effect.
How to Use This Calculator
- Enter the interest earned during the period.
- Enter the average daily balance during the period.
- Click "Calculate" to see the APR.
- Review the result and compare it with other accounts.