What's an APY? (2024)

What's an APY? (1)

When setting up or maintaining a bank or credit card account, it is important to fully understand the financial terms and phrases that are often used so you know exactly how your funds will be handled. OnPath Federal Credit Union has created this quick guide to help you familiarize yourself with one of these terms – APY.

Annual Percentage Yield

APY, or "annual percentage yield," measures the amount of money from interest that you receive from your bank account over one year. Virtually all savings accounts and even some checking accounts have an APY. The higher your APY is, the more money you will earn over time. APY includes compounding interest, which is the interest you earn from the lump sum in your account, as well as the interest accrued from the money that comes from your initial interest.

For example, if you put $1,000 in a savings account with an APY of 0.25%, you'll earn $2.50 in standard interest. You will also receive interest on that additional $2.50 that you earned at the same rate, which is an extra $2.52. That money grows over time and can add up quickly.

APY and APR – What's the Difference?

APR and APY can easily be confused. APR, or "annual rate of interest," is your return from interest over a year, excluding compounding interest. If we use the example above, the APR will only cover the initial $2.50 that you earned on your $1,000 savings, and not the additional $2.52 in interest.

Knowing this difference is crucial when borrowing money. When a bank quotes you an interest rate, make sure to confirm if it is APR or APY, because APR can hide hidden costs by not including compounding interest.

APY Rates at OnPath Federal Credit Union

The national average for APY rates is around 0.1%. As part of OnPath Federal Credit Union's mission to help set up its members for a bright financial future, we strive to offer higher rates so you can earn more on your savings. Our current rates for varying accounts include:

  • Savings Accounts: An APY is offered for savings accounts with a balance of over $200. Once that threshold is reached, the rate is 0.25%, and increases as you put in more money, capping at 0.6% for any amount over $50,001.
  • Checking Accounts: While an APY for this type of checking account is much less common, OnPath Federal Credit Union offers one for their Wise Choice Checking account. The rate for this account is 0.25%.
  • Share Certificates: For investors looking for more long-term savings, take advantage of share certificates with much higher APYs. Depending on the length of the certificate, you can earn anywhere from 0.5% to 2.53% on your investment.

Let Your Money Make Money

The compounding interest of APY can provide large dividends for you in the long run if you are careful about managing your investments. The high rates offered by OnPath Federal Credit Union can help you along your path to growing your savings. To take advantage of these rates or learn more information about opening an account, contact us today.

What's an APY? (2024)

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