Here’s everything savers need to know about APY

Core Insights - The article emphasizes the importance of Annual Percentage Yield (APY) as a more comprehensive measure than simple interest rates when evaluating savings accounts and certificates of deposit (CDs) [2][3][4] Group 1: Understanding APY - APY represents the total interest earned in one year, expressed as a percentage, and is crucial for comparing different savings options [3] - The concept of APY incorporates compound interest, allowing account holders to earn interest on both their initial deposit and the interest already accrued [4][7] Group 2: Importance of Compounding - Compounding interest significantly enhances earnings; for example, a $10,000 deposit at 4% interest compounded monthly yields $408 instead of $400, demonstrating the value of frequent compounding [4][7] - The article highlights that the best savings accounts currently offer APYs between 3.85% and 4%, while the national average is only 0.60%, indicating a substantial difference in potential earnings [6][7] Group 3: Market Comparison - There is a notable disparity in APY rates across different banks and credit unions, with potential earnings on a $10,000 balance varying from $60 at the national average to $400 at top rates, suggesting the need for consumers to shop around for better rates [6][7]