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Bank account yield is the rate of return you earn for keeping your money in a deposit account. Annual percentage yield, or APY, takes that idea a step further by showing how much interest you could earn in one year, including the effect of compounding.
Savings accounts with high APYs can be a smart place to store cash and grow it over time. Depending on the rate, your account might even keep pace with inflation. Here's how yield works and how to use APY to estimate your earnings.
What Is Bank Account Yield?
When you deposit money in a bank account, you give the bank permission to use those funds, including by lending them through credit cards and loans. In return, the bank pays you interest.
The interest you earn varies by account type, including checking, savings, certificate of deposit (CD) and money market accounts. When comparing accounts, watch for these terms:
- Annual percentage yield: Expressed as a percentage, APY is the amount of interest an account earns in a year, including compounding. The higher the APY, the more your money can grow.
- Balance: Your balance is the amount of money in your account at any given time. Some accounts, like traditional savings accounts and CDs, require a minimum opening deposit.
- Simple interest: Some accounts calculate earnings as simple interest, which is based only on your principal balance.
- Compound interest: Compound interest usually works in your favor because it's calculated on your principal plus the interest you've already earned.
Myth buster: APY and interest rate aren't the same thing. The interest rate is the base rate you earn, while APY includes the effect of compounding. That's why APY is almost always slightly higher than the stated interest rate, and it's the better number to use when comparing accounts.
Learn more: Places to Save Your Money Based on Your Goals
Find High-Yield Savings Accounts
How Do You Calculate Yield?
Most savings, CD and money market accounts use compound interest, but you can get a quick estimate of your earnings by calculating simple interest first. Both formulas are useful depending on the account.
Simple Interest Formula
- P = The initial deposit
- r = The interest rate expressed as a decimal
- t = The number of years the amount is deposited
Example: Say a financial institution is offering a high-yield savings account that pays 3.5% APY annually, and you open an account with a $1,000 deposit. In that case, you could compute the interest as $1,000 x 0.035 x 1 = $35. Assuming you don't deposit more money or withdraw the initial deposit amount, you'll earn $35 over one year and $350 over 10 years on your initial deposit.
Compound Interest Formula
- A = The total amount you'll earn during the compounding period
- P = The initial deposit
- r = The interest rate expressed as a decimal
- n = The number of compounding periods in a year
- t = The number of years the amount is deposited
The math looks intimidating, but a compound interest calculator can do the work for you. After entering your numbers, you'll see how compounding can grow your balance over time.
Example: Using the above example, if you deposit $1,000 in the same savings account earning 3.5% APY, but your account calculates interest using compound interest daily, you would end up with an extra $419.04 over 10 years—$79.04 more than you would earn with an annual simple interest calculation.
While these earnings may seem paltry, remember the initial investment was a one-time $1,000 deposit. Your earnings could be exponentially higher if you follow a monthly savings plan and contribute more over time. If you're comparing accounts, you can get an apples-to-apples comparison by comparing the APYs since the compounding factor is the same.
What Types of Accounts Provide the Best Yield?
The yield you earn depends heavily on the type of account you choose. A high-yield savings account typically pays much more than a traditional one. According to the Federal Deposit Insurance Corp. (FDIC), the national average savings account rate was just 0.38% APY as of April 2026. By contrast, the top high-yield savings accounts deliver a substantially higher yield of 3% to 4%.
Here's a snapshot of the average yields by account type as of April 2026, according to the FDIC. (The FDIC does not publish rates for high-yield savings accounts specifically.)
| Bank Account Type | Average Interest Rate |
|---|---|
| Savings | 0.38% |
| Interest-bearing checking | 0.07% |
| Money market | 0.57% |
| 1-month CD | 0.21% |
| 3-month CD | 1.25% |
| 6-month CD | 1.44% |
| 12-month CD | 1.53% |
| 24-month CD | 1.51% |
| 36-month CD | 1.33% |
| 48-month CD | 1.25% |
| 60-month CD | 1.35% |
Source: FDIC
Earnings are only part of the picture. When comparing accounts, look closely at fees, which can offset the interest you earn. Also consider how easily you can access your money. Some accounts, including CDs, charge a penalty if you withdraw funds before the maturity date.
A high-yield savings or money market account can be a low-risk place to keep an emergency fund or other money you want to keep liquid. CD laddering can also be a strategic way to grow savings while keeping some funds accessible.
That said, deposit accounts may not always be the best fit. If you're saving for retirement, you may earn more by investing in a tax-advantaged IRA or 401(k). Stocks, bonds and mutual funds may also deliver greater long-term returns that better keep pace with inflation.
Learn more: Ways to Earn More Money on Your Savings
Frequently Asked Questions
What Is a Good APY?
A good APY is one that's substantially higher than the national average. If you're looking for a high-yield savings account, compare the best high-yield savings account yields to find the best fit for you. Keep in mind that APYs on savings and money market accounts are variable, so they can change as market conditions shift.
What Is the Difference Between APR and APY?
Annual percentage rate (APR) is the annual interest rate you pay when you borrow money, such as on a credit card or loan. APY is the annual interest rate you earn on a deposit account, including the effect of compounding. In short, APR is what you pay, and APY is what you earn.
The Bottom Line
Letting your money work for you and earning a solid yield is important, but establishing a regular savings habit toward your goals is even more critical. Invest in your account regularly, whether you open a savings, money market or certificate of deposit account. By doing so, you can maximize the advantage of high yields and compounding interest and build long-term wealth over time.
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