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APY stands for Annual Percentage Yield and represents how much interest you would earn on a deposit for an entire year, taking into account compound interest (the interest earned on interest), and assuming no other deposits or withdrawals happen during the year.

This allows you to compare the interest rates of different accounts regardless of when and how they pay interest.

APY is different from Interest Rate because it factors in compound interest and frequency of the compounding.

For example, if you deposited $1,000 into a Savings Vault with an interest rate of 1.50% compounded monthly, you would have $1,015.10 after one year:

Deposit amount: $1,000

Interest: $15.10

Balance after one year: $1,015.10

Your APY would be calculated as the interest earned divided by the deposit amount, and would be 1.51%. Higher than the interest rate of 1.50% because of interest earned on interest!