APY vs. Interest Rate: What’s the Difference?

By U.S. News & World Report
December 14, 2025 | 7:00 PM

The APY and the interest rate are two key figures to know when storing money in a savings account or other interest-earning bank account.

Both are expressed as percentages, but an account’s APY gives you the full picture of how much interest you can earn on your money.

[Read: Best Savings Accounts.]

What Is an Interest Rate?

An interest rate is the amount of money — expressed as a percentage, such as 3.5% — that a bank or credit union pays you to use the money you’ve deposited.

Banks and credit unions set interest rates for savings and other deposit accounts, which are influenced by the benchmark rates set by the Federal Reserve.

How Is it Calculated?

Calculating interest on a savings account for a single period is fairly straightforward. The formula for calculating simple interest is A = P x R x T.

— A is the amount of interest you’ll wind up with.

— P is the principal or initial deposit.

— R is the annual interest rate (shown in decimal format).

— T is the number of years.

Let’s say your account balance is $10,000 and you don’t deposit any more money into the account.

350 = 10,000 x .035 x 1

When you multiply the interest rate by the balance in a bank account, you come up with the basic interest rate. If the interest rate is 3.50% and compounds yearly, the total interest you’d accumulate after one year would be $350, giving you a balance of $10,350.

What Is APY?

APY refers to how much interest a savings account, certificate of deposit, money market account, checking account or other type of deposit account earns in one year.

An account’s APY includes compound interest, or “interest on interest.” All banks pay compound interest. This represents the total interest you earn both on the funds you’ve deposited and the interest you’ve gained in previous cycles. So, the higher the APY is on a bank or credit union account, the more interest you stand to gain.

Banks and credit unions generally display account APYs on their websites, advertisements and marketing materials. This information enables savers to an apples-to-apples comparison of how much interest they stand to earn across various financial products and institutions.

How Is it Calculated?

Since APY includes compound interest, the calculations are a bit more complicated than the basic interest rate. The formula for calculating compound interest is A = P(1 + r/n)^nt.

— A is the amount of money you’ll wind up with.

— P is the principal or initial deposit.

— r is the annual interest rate (shown in decimal format).

— n is the number of times the interest compounds in a year.

— t is the number of years.

Let’s look at the same bank account with $10,000 but if the interest compounds daily.

10,356.18 = 10,000(1 + .035/365)^365×1

If you don’t add to or withdraw from that pot of money and the interest rate stays at 3.50%, you will have earned $356.18 in interest for an end balance of $10,356.18; an extra $6.18 compared to an account that doesn’t compound over the course of the year. This is because you’ll have earned interest on those little bits of interest that have been applied to the balance throughout the year, in addition to the starting balance.

[See: Best Credit Unions]

What Is the Difference Between APY and Interest Rate?

How the interest is applied to your account determines the key difference between the interest rate and the APY.

The interest rate is the percentage of interest applied to your balance during a certain period, such as each day or each month. APY represents the total interest you can expect to earn over a year by factoring in how frequently the interest compounds.

You can use a savings calculator to determine how much your balance will grow based on your account’s APY. The table below shows how different compounding rates would affect savings over 10 years if the interest rate is 3.50% and the starting principle is $10,000.

[CHART]

When you’re looking for a place to park your savings, skip the basic interest rate and look at the APY. Because it includes compound interest, the APY provides the broader picture of how much interest you can expect to earn.

[See: Best High-Yield Savings Accounts: Up to 4.57% APY]

What to Look for When Shopping for Savings Accounts

While the APY and interest rate are important factors in choosing a savings account, you should also look at:

— Minimum deposit. Would you be required to make a minimum deposit to open a savings account that you’re eyeing? A minimum deposit might not be a dealbreaker unless the amount of the initial deposit is high. Your best bet: Search for a savings account with no minimum initial deposit.

— Minimum balance. Would you be required to keep a certain amount of money in your account? In some cases, a financial institution might demand that you maintain a minimum balance to score the best interest rates. If possible, select a savings account with no minimum balance requirement.

— Compounding rate. Does the interest compound daily, monthly or quarterly? More frequent compounding is more beneficial to you.

— Fees. Would you end up paying a bunch of fees that would eat into the interest that you’d earned? Ideally, you should pick a savings account with low or no fees.

— ATMs. If a savings account provides an ATM card, how much access would you have to fee-free ATMs in the bank’s or credit union’s network?

— Branches. Are you OK doing business solely online? Or do you want to be able to visit a physical branch? The answer to these questions may help determine which savings account you pick.

— Customer service. What is the bank’s or credit union’s reputation for providing good (or bad) customer service?

More from U.S. News

How Many Savings Accounts Should You Have?

The Average Savings Account Balance

Do You Pay Taxes on Savings Account Interest?

APY vs. Interest Rate: What’s the Difference? originally appeared on usnews.com

Update 12/15/25: This story was previously published at an earlier date and has been updated with new information.

Asia’s next great gourmet destination? Inside Indonesia’s fine-dining revolution

By CNN
August 11, 2026 | 5:44 AM

More than 120 years ago, Eliza Ruhamah Scidmore, National Geographic magazine’s first female writer, photographer and board member, chronicled her travels through colonial Indonesia in her book “Java: The Garden of the East.”She was particularly fascinated by a feast known as the rijsttafel (rice table), a multi-dish banquet that was served in the grand Hotel de Nederlanden in Batavia, as Jakarta was known then.Scidmore vividly recalled a “conglomerate mountain” of food, including bits of fish, duck, chicken, beef, omelettes and onions piled alongside steaks, salads, curries, chutneys, spices and tropical fruits.The sumptuous spread had something to satisfy everyone amongst the 100 or so guests that filled the grand dining hall — even the “squeamish folk, unseasoned tourists and well-starched Britons with a small sense of humor.”Like Scidmore, most early Western documentation of Indonesia’s flavors focused on the opulent colonial feast. Little else was known about the diverse and rich flavors found across the enormous archipelago, in spite of it being home to the fabled Spice Islands, which sparked a 16th- and 17th-century “spice rush” for cloves, nutmeg and mace by Portuguese, Dutch and British traders.In more recent decades, the world has become better acquainted with some of the beloved humble foods found in Indonesian homes and warungs (street-side eateries), with satay, nasi goreng and beef rendang among the most familiar dishes beloved by travelers.But now, there’s a rising number of contemporary chefs who are elevating the national cuisine on the global stage by reimagining its famous spices into fine-dining experiences, while sharing the sophisticated stories of Indonesian flavor through a different lens.Made up of thousands of islands dotted across two oceans, Indonesia is the world’s largest archipelagic country. It would be an understatement to say the country’s cuisine is wildly varied.As a result, “the existing understanding of Indonesian food culture is very shallow,” says William Wongso, an Indonesian culinary expert and author.Boasting an enviable array of regional ingredients and flavors, the country’s chefs have been working to educate international gourmets — and even locals — about the beauty of Indonesian cuisine.And Jakarta, its capital city, has become a breeding ground for the movement. Wongso compares it to the dining scenes in New York or Shanghai, which draw talent from all over their respective countries. “Everybody wants to come here to make a thing,” he says. “So people from different regions bring flavors and food cultures.”Some open humble warungs and serve their home cooking. A few look beyond recipes and focus on elements that make Indonesian cuisine unique for a wider audience, reinventing the whole experience.A modern, fine-dining blueprintEnter August, which opened in 2021 inside a gleaming skyscraper in Jakarta’s central business district.The duo behind the concept, Jakartan Hans Christian and Budi Cahyadi from the Indonesian island of Lombok, were definitely not the first people to promote Indonesian flavors — Christian emphasizes figures like Wongso, for example, who have been championing gastro-diplomacy abroad for decades.But August has spearheaded a new format and standard for the country’s fine-dining restaurants: a modern, Indonesia-inspired tasting menu operating at a world-class level of culinary execution and service.The industry has already noticed. August became one of the few Indonesian restaurants to achieve international recognition, placing 42nd on Asia’s 50 Best Restaurants 2026 and earning accolades at The Best Chef Awards.“When I came back to Jakarta, you either had classic French fine dining or very casual bistros, mostly run by expat chefs,” says Christian, who sharpened his skills in Malaysia and the United States before returning to Jakarta in 2016.“There were no locally grown chefs doing their own thing with their own roots or interpretations. For me, August is about the pride of telling our own story … and a responsibility to not only embrace our roots, but also relearn them.”Cahyadi, with more than a decade of hospitality experience in a luxury hotel, agrees. He currently helms the front of house in August’s dining room.“In Jakarta, you either had to pick a place where the food was good but the service was lousy, or a casual place where service was bad but food was decent. When I met Hans, I knew it was time for a place where food is excellent and hospitality is delivered at the exact same time,” he says.In 2019, the two started August as a private kitchen concept before turning it into the current restaurant in 2021.Inside August’s intimate dining room — warmly lit with dark wood accents and a bright, open stainless-steel kitchen at the end of the dining room — the restaurant’s two tasting menus blend familiar Indonesian flavor profiles into completely unexpected forms.Their daikon dish is inspired by the format of Japanese agedashi tofu — silken tofu coated in starch, deep-fried until golden brown and traditionally dressed in dashi sauce.August’s version is served with a cuko sauce — a sweet and sour reduction made with tamarind and palm sugar featuring a tangy umami taste.It reminds locals of eating pempek, the Indonesian fishcake. A drizzle of andaliman pepper oil, Indonesia’s version of Sichuan peppercorns, gives the dish a unique, numbing spicy kick.Another highlight features Japanese Kimendai fish cooked by pouring hot oil over the scales until it crisps up while keeping the flesh tender. It sits in a kuah garang asem (yellow sour curry sauce) from the Central Java region.The sourness comes from a native green fruit called belimbing wuluh (or bilimbi), which looks like an oblong tomato but tastes extremely acidic, while ginger flowers provide a touch of freshness.The curry base is made from a yellow bumbu — made of aromatics such as turmeric and lemongrass. Often compared with France’s mother sauces (a group of five master sauces, such as Béchamel and Hollandaise, that are said to be the foundation of classical French cooking), Indonesian bumbu are spiced sauces that take hours to caramelize and form the base of many different dishes.Christian says that August has slowly evolved over the years, with more Indonesian flavors being incorporated into his menu as the team gains confidence and the demand grows.“In the beginning, our menu leaned more towards classic European because that was my formal training. When more international guests came, they expected more Indonesian flavor,” says Christian.Now, with half of their guests coming from overseas, the team tries to find the balance carefully without being intimidating.“Finding that balance was crucial — doing modern Indonesian cooking in a way that’s exciting for locals without just putting expensive ingredients in a traditional dish. We want to start from a product or a cooking method and create something new out of that idea,” says Christian.The founders admit that Jakarta has few fine dining concepts compared to fellow Southeast Asian cities such as Kuala Lumpur, Singapore, Manila and Bangkok.“We knew we were a few years behind, but we are in progress to catch up. Over the years, the interest from people who want to learn and taste the flavor of Indonesia is growing,” says Christian. “For the past five to six years, we’ve been on a mission to prove people wrong.”It wasn’t easy. It wasn’t just about the menus, but the operation.They were the first restaurant to impose a reservation fee for diners in Jakarta. It also took a few years to educate their diners to be punctual for the tasting menu so the table could start the menu together – an often tricky feat in Jakarta traffic.But August’s success helped set new operational benchmarks for the city, proving that local diners were ready to enjoy high-end tasting menus.In the years since, Jakarta’s fine-dining community has expanded rapidly.ESA, opened in 2023, proudly offers a menu called New Jakarta Cuisine. Kindling, which opened the following year, blends Indonesian-Chinese dishes with French technique. Selera, newly opened this year in the Keraton at the Plaza hotel, emphasizes the nation’s culinary heritage with local ingredients.Outside the capital, things are changing, too, particularly in the country’s tourist hotspots. Bali, for example, has evolved to offer more than just fine resort dining and Western restaurants catering to visitors.Locavore NXT, helmed by Dutch-Indonesian duo Eelke Plasmeijer and Ray Adriansyah, serves a tasting menu that highlights local ingredients. The independent concept also has a farm, laboratory and store.Meanwhile, young, local and independent concepts are slowly increasing elsewhere in the country.Overlooking the historical Prambanan Temple and Mount Merapi, Suwatu in Yogyakarta, the royal cultural heart of Java, is an upscale hillside restaurant with a menu packed with local dishes cooked by local villagers.In Bandung, both MMBS (Mari Merangkai Bunga Seroja) and Plataran Bandung serve local Sundanese cuisine, with hyper-seasonal tasting menus featuring a creative twist.Not just about the price tagAt the same time, classic Indonesian restaurants are reexamining the stories they would like to tell.For a long time, the 1945 Restaurant inside the Fairmont Jakarta has been regarded as the city’s only high-end Indonesian restaurant in a five-star hotel.Taking over as the chef de cuisine this year, Yopi Tumeru has been determined to inject fresh ideas into the 11-year-old establishment — and he was inspired by the traditional rijsttafel concept.His vision of the legendary feast isn’t only a sumptuous buffet but an educational exploration of Indonesian cuisine.“For many years, Indonesian food was presented either as home cooking, street food or part of a hotel buffet… Our Rijsttafel was designed as a culinary journey through the archipelago. We preserve the generous and communal character of the traditional experience while refining the portions, presentation and sequence,” Tumeru says.The menu includes dishes such as wagyu beef rendang, duck leg confit with sambal madura, tuna collar rica-rica (rahang tuna), tempe nachos and es teler cheesecake — all created to shine new light onto old dishes.For chefs like Tumeru, presenting Indonesian cuisine in a haute gastronomic format isn’t just about slapping on higher price tags and using expensive ingredients.They are proudly showcasing the often undervalued Indonesian cuisine — from the ingredients, the knowledge and the labor to the cultural heritage.“Rendang, for example, is not simply beef cooked in coconut milk. It requires patience, careful control of the heat, and an understanding of how the spices develop over time,” says Tumeru, who feels chefs have a responsibility to help guests appreciate that complexity.Despite giving Indonesian cuisine an upscale makeover, all of the chefs insist their roots and hearts remain with the humble, family-run warung. They encourage diners to ask for street-food tips, which might otherwise feel intimidating without a local guide.The movement isn’t about replacing affordable neighborhood joints. It’s about broadening how the world sees Indonesian food, using fine dining as a welcoming gateway into their country’s vast culinary heritage.“There is still a mindset that Indonesian food cannot be expensive — that is not true,” says Wongso.“These high-end restaurants, if they’re doing it right, they’re quite helpful in changing people’s mindsets. Indonesian food cannot be cheap. It takes immense labor and skill. A single sauce or spice paste takes hours of balancing and preparation. You can Google many things, but you can’t Google taste.”The-CNN-Wire™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

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