A standard savings account usually earns interest that is expressed as an annual percentage yield (APY) and calculated using simple or compound interest, most often compound interest.

Types of interest

• Simple interest is calculated only on the money you originally deposit (the principal), so the interest amount grows in a straight line over time.

• Compound interest is calculated on both your principal and the interest that has already been added, so your balance can grow faster because you earn “interest on interest.”

How banks show the rate

• Banks typically advertise savings account earnings as an APY, which already factors in the effect of compounding over a year.

• The actual rate you earn can vary widely; for example, recent averages in the U.S. are well under 1% APY for standard accounts, while some high‑yield savings accounts offer rates several times higher than that average.