banking basics
How Interest and APY Work
Understand the difference between interest rate and APY, compounding, and why comparing APYs matters when you save.
Author: OnPoint Education Team · Published 2026-04-28 · Updated 2026-09-15 · OnPoint Community Credit Union
Interest rate vs. APY
An interest rate is the stated rate paid on deposits. Annual Percentage Yield (APY) includes the effect of compounding over a year, which makes APY useful for comparing savings products that compound on different schedules.
Why compounding frequency matters
When interest is added to your balance more often, you can earn interest on previously credited interest. Two accounts with the same nominal rate can produce different APYs if they compound differently.
Read the fine print on tiers and balances
Some savings products pay different APYs at different balance tiers. Confirm minimum balance requirements, how tiers are calculated, and any conditions that affect the advertised yield before you compare offers.
How this helps OnPoint members
This education article is published by OnPoint Community Credit Union (also known as OnPoint Credit Union / OnPointCU) for people banking in Oregon and Southwest Washington. Pair what you learn with calculators, rates, and products—then manage accounts through OnPoint login.
Sources
- CFPB — What is the difference between interest rate and APR?
- Truth in Savings Act overview (NCUA / regulatory education)
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