APY stands for "annual percentage yield," which is the interest you earn by putting your money into an account. It is the actual rate of return you will earn on your checking or savings account, taking into account the effect of compounding interest. APY is an important term to know for anyone focused on earning a return on their money. The higher it is, the faster your money grows. APY includes compound interest, which means that interest can be compounded daily, monthly, or annually, depending on the account. The higher a savings account’s APY, the more you’ll earn on your money over time, especially as the interest compounds. APY is the percentage rate of the total amount of interest earned on a deposit account or an investment, based on the interest rate and the compounding frequency for one year.

It is important to note that APY is different from APR (annual percentage rate), which is the interest rate on an account plus any fees you’ll have to pay. APR measures how much interest you’ll pay to borrow money, while APY measures how much interest you can earn on deposits. A good APY is anything that’s above the national average, which was 0.6% as of November 2023.