APY
Definition
APY, or annual percentage yield, is what savings earn across a year once compounding is counted. It is the figure that lets two savings accounts be compared directly.
Compounding is the difference between APY and a plain interest rate. Interest that is paid and then earns interest of its own produces a slightly higher effective return than the headline rate alone.
$10,000 at a 4% APY earns roughly $400 over a year, assuming the rate holds and nothing is withdrawn.
Rates on most savings accounts are variable and can change at any time, so APY describes current conditions rather than a promise.