APY vs APR: what exchanges actually show you, and why it matters

You open an exchange, see "APY 5%" next to USDT, and you're not sure what you're looking at. Is that a lot? Is it per year? Is it guaranteed? Here's the short answer first, the details after.

The short answer

APR (Annual Percentage Rate) is the simple annual rate, with no compounding. Put $1,000 in at 10% APR and a year later you've earned $100.

APY (Annual Percentage Yield) is the annual return with compound interest: the interest you earn is regularly added to your deposit and starts earning interest itself. Same 10%, but compounded daily, gives you about $105 after a year instead of $100.

The formula to convert APR to APY with daily compounding:

APY = (1 + APR / 365)^365 − 1

At small rates the difference is barely noticeable. At big rates it's huge — and that's exactly why the distinction matters in crypto, where double- and triple-digit rates are common.

The table: APR vs APY with daily compounding

Every number below is computed honestly with the formula above — no rounding in anyone's favor:

APR	APY (daily compounding)	Difference
5%	5.13%	+0.13 pp
10%	10.52%	+0.52 pp
20%	22.13%	+2.13 pp
50%	64.82%	+14.82 pp
100%	171.46%	+71.46 pp

Notice the pattern. At 5% the gap is pocket change. At 100% APR, the honest daily-compounded APY is 171%. The same product can "sound" very different depending on which of the two numbers you put on the banner — and the gap grows non-linearly as rates climb.

A quick sanity check you can do yourself: 20% APR means roughly 0.0548% per day. Reinvest that daily for 365 days and the compounding alone adds about 2.13 percentage points on top. Nothing magical — just exponents doing their thing.

In dollar terms, on a $1,000 deposit held for one year: 20% APR pays $200 if interest sits idle, and about $221 if it's reinvested daily. At 5%, the same comparison is $50 versus $51.27. Keep these two examples in mind — they explain almost everything about when the APR/APY distinction is worth your attention and when it isn't.

One more thing worth knowing: compounding frequency matters less than it seems. Daily compounding at 10% APR gives 10.52% APY; monthly gives 10.47%; weekly gives 10.51%. Once you compound at least monthly, the curve flattens out. So when a platform advertises "compounded every hour!" — that's marketing flavor, not meaningful extra yield.

What exchanges actually show you

Most earn-product storefronts display APY or a vague "Est. APR" — and that's not an accident. Marketing prefers the bigger number: 22.1% looks better than 20%, even though it's the same underlying rate. On some platforms a label that literally says "APR" is calculated as APY under the hood — the only way to find out is to dig through the help-center fine print.

There's no standard here. Unlike banks, which in most jurisdictions are required to disclose rates under a unified methodology, crypto exchanges can label their numbers more or less however they like. So comparing "7% on exchange A" against "7.2% on exchange B" head-to-head is meaningless until you know what each number actually represents: compounded or not, before or after fees, base tier or promo tier.

The further you go from centralized exchanges, the wilder it gets. DeFi farms routinely quote APY that assumes you re-stake reward tokens daily at today's token price — a triple assumption (rate holds, price holds, you actually compound) baked into one shiny number. The label looks identical to a savings account's APY, but the thing it describes is far less certain.

Our position: on YieldScope rates are shown as annual figures following each platform's own methodology — we display what the exchange actually publishes and we don't "improve" a number by adding compounding where the platform doesn't. How we collect and refresh the data is documented on our transparency page.

The traps the storefront won't mention

Floating rates: yesterday's APY is not a promise

Most flexible earn products have a floating rate. The number on the storefront is usually yesterday's rate, or a 7-day average, annualized. Tomorrow it can be different. "8% APY" does not mean "you will have +8% in a year" — it means "if the current rate held for a full year, you'd get +8%." For products whose yield depends on funding rates or borrowing demand, the rate can move a lot within a single week.

Promo tiers: the big number applies to the first $200-500 only

A classic move you'll see on Binance, Gate, and plenty of others: the banner says "USDT — 10% APY!", and the details say 10% applies only to your first $200-500, with the rest earning a base rate of 2-4%. Deposit $5,000 and your blended rate across the whole position lands around 3%, not 10. Always check the tier structure before comparing offers — the headline number on a tiered product describes the smallest slice of your money.

"Est." means "estimate"

The "Est." prefix (estimated) is the platform's legal cushion: the rate is not guaranteed and can change at any moment. This especially applies to products whose yield comes from market conditions — funding rates, loan demand, pool activity. An "Est. APR" is a weather forecast, not a contract.

How to count honestly

Practical rules for a beginner:

1. At rates up to ~10%, don't obsess over APR vs APY. The difference between 5% APR and 5.13% APY is $1.30 a year on a thousand dollars. Platform risk — bankruptcy, frozen withdrawals, a stablecoin depeg — moves your outcome orders of magnitude more than compounding mechanics do.
2. Compare rates in the same "currency." Either convert everything to APR or everything to APY. The formula above works in both directions.
3. Read the tier structure and the rate type (fixed vs flexible), not just the headline.
4. Think in dollars, not percentages. "How much will I actually receive on my amount over my horizon" is a sobering question. For USDT you can run the numbers in our calculator in a few seconds.

And if you're at the very start of the journey, begin with our stablecoin yield guide for beginners — it walks through product types and risks before you compare any rates at all.

FAQ

Is APY always higher than APR?

For the same nominal rate, with at least one compounding event per year — yes, APY ≥ APR. They're equal only when interest is never reinvested. But be careful with cross-platform comparisons: "5% APY" on one platform can deliver less actual yield than "5% APR" on another if the first one has promo tiers or a floating rate that drops next week.

My exchange says APR but credits interest daily. What do I actually earn?

If the credited interest is automatically added to your deposit (auto-compound), your effective annual return is the APY from the table above. If interest accrues separately and is never reinvested, you earn exactly the stated APR. Most flexible products auto-compound; most locked products don't — check the product page.

What matters more when picking a platform — the rate or the risk?

The risk, and it's not close. The gap between 5% and 5.5% is $5 a year per $1,000. Losing your deposit to a platform collapse is −100%, and crypto history has no shortage of examples. Filter platforms by reliability first — proof of reserves, licensing, track record — and only then compare rates among the ones that pass.

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This article is for information purposes only and is not investment advice. Rates change constantly, and any crypto yield product carries a risk of losing funds.