1. What is APY?

APY (Annual Percentage Yield) is the real rate of return earned on a savings account, taking into account the effect of compounding interest. Unlike simple interest rate, APY gives you the actual amount you'll earn in a year.

2. How Does the Calculator Work?

The calculator uses the APY formula:

Where:

• \( r \) — Annual interest rate (in decimal form)
• 365 — Number of compounding periods per year (daily compounding)

Explanation: The formula calculates the total amount you would earn over a year if the interest was compounded daily.

3. Importance of APY Calculation

Details: APY allows you to compare different savings accounts accurately. A higher APY means more earnings on your savings. Even small differences in APY can significantly impact your savings over time.

4. Using the Calculator

Tips: Enter the annual interest rate (like 4.25 for 4.25%). The calculator will show you the actual APY after daily compounding.

5. Frequently Asked Questions (FAQ)

Q1: Why does Amex use APY instead of simple interest rate?
A: APY gives a more accurate picture of your potential earnings by accounting for compounding, which makes your money grow faster.

Q2: How often is interest compounded in Amex savings?
A: American Express High Yield Savings compounds interest daily and credits it monthly.

Q3: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY does. For savings accounts, APY is the more useful number.

Q4: Does the APY change over time?
A: Yes, banks can adjust APY based on market conditions. Always check current rates.

Q5: Is there a minimum balance to earn the advertised APY?
A: For Amex High Yield Savings, there's no minimum balance required to earn the APY.