When you deposit money into an account, the money earns interest. Interest rates on savings accounts and certificates can change based on an agreed upon date. Merck Employee FCU’s savings account rates traditionally change quarterly, though they can be changed more frequently based on market conditions. CD offers from the credit union will also change based on market conditions.
The interest rate is used to determine how much interest the certificate or account earns each day. It is paid at the agreed upon time, quarterly in the case of the credit union’s savings accounts, or at the time of maturity like CDs.
APY stands for Annual Percentage Yield, which is the amount of interest, shown as a percentage, you will earn if you keep your money in a savings account or certificate for a year. APY takes into account not only interest but also the rate at which it compounds.
APY is used to show the rate of return on funds over the course of a year.
Below is an example of how compounding impacts the APY and why it is relevant even on 6-month certificates currently being offered by the credit union.
