Savings Account APR Calculator
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Reviewed by Calculator Editorial Team
Use this savings account APR calculator to determine the annual percentage rate (APR) on your savings account. APR shows the actual cost of borrowing or the interest earned on your savings, before any compounding effects. This calculator helps you compare different savings accounts and understand how interest is calculated.
How to Use This Calculator
To calculate your savings account APR:
- Enter the principal amount (the initial deposit or balance in your savings account).
- Enter the interest earned during the period (usually one year).
- Select the time period for the interest calculation (typically annual).
- Click "Calculate" to see your APR.
The calculator will display your APR as a percentage. You can also view a chart showing how your savings grow over time with the calculated APR.
APR Calculation Formula
The formula for calculating APR is:
APR = (Interest Earned / Principal) × (Time Period / 1) × 100
Where:
- Interest Earned is the amount of interest earned during the period.
- Principal is the initial amount of money in the savings account.
- Time Period is the duration for which the interest is calculated (typically 1 year).
This formula gives you the simple annual interest rate, which is the rate you would earn if the interest were not compounded.
Worked Example
Let's say you have $1,000 in a savings account and earn $25 in interest over one year. Using the APR formula:
APR = ($25 / $1,000) × (1 / 1) × 100 = 2.5%
So, your savings account has an APR of 2.5%. This means you earn 2.5% interest on your savings each year.
APR vs. APY Comparison
While APR shows the simple annual interest rate, APY (Annual Percentage Yield) shows the effective annual rate, taking into account compounding. Here's a comparison table:
| Term | Definition | Calculation |
|---|---|---|
| APR | Annual Percentage Rate | Simple interest rate |
| APY | Annual Percentage Yield | Effective interest rate including compounding |
For example, if a savings account offers a 2% APR with monthly compounding, the APY would be higher than 2% because of the compounding effect.
Frequently Asked Questions
What is the difference between APR and APY?
APR is the simple annual interest rate, while APY is the effective annual yield that includes compounding. APY is always higher than APR for accounts with compounding interest.
How often is interest calculated in a savings account?
Interest is typically calculated daily, monthly, or annually, depending on the bank's policy. The more frequently interest is calculated, the higher the effective yield (APY).
Can I use this calculator for loans?
Yes, this calculator can also be used to calculate the APR on loans. Simply enter the interest paid and the principal amount.