Understand APY and How It Can Grow Your Savings

If you’ve ever opened a savings account, CD, or money market account, you’ve likely seen the term “APY.” But what does it really mean, and why does it matter for your savings growth? Understanding APY can help you make smarter choices about where to keep your money and how to earn more over time.

Understanding APY

When you’re comparing savings accounts, certificates, or money market options, the term “APY” often comes up. But it’s more than just a number, it’s a key indicator of how your money can grow. Understanding how APY works helps you see the true earning potential of your deposits and make informed financial choices.

What Does APY Stand For?

APY stands for Annual Percentage Yield. It represents the total amount of dividends (or interest) you’ll earn on your money in one year, including the effects of compounding. Compounding means your dividends are added to your balance, so you start earning dividends on your dividends. Over time, that can make a real difference in your savings.

APY vs. Dividend Rate

At People Driven Credit Union, we pay dividends instead of “interest” because we’re owned by our members, not shareholders. The dividend rate is the percentage you earn before compounding. The APY shows the total annual return once compounding is factored in, so it’s a more accurate way to compare savings options across different financial institutions.

How Compounding Works

Here’s an example: If you deposit $5,000 into a certificate at 4.85% APY for 12 months, you’ll earn about $242 in dividends by the end of the term, without adding another dime. Compounding turns time into a powerful growth tool, especially when you leave your funds untouched.

How APY Can Grow Your Savings

When you’re comparing savings accounts, CDs, or IRAs, APY helps you see the true earning potential. A higher APY means your money grows faster. Even a small difference—say, 0.25%—can add up significantly over time, especially for long-term savings.

Ways to Grow with PDCU

• Certificates (CDs): Lock in a guaranteed rate and watch your savings grow for a fixed term.
• Money Market Accounts: Earn higher returns while keeping access to your funds.
• IRA Savings: Build your retirement fund with competitive rates and the safety of NCUA insurance.

Whether you’re just starting out or growing a nest egg, understanding APY can help you make confident financial decisions. When you save with People Driven Credit Union, your money doesn’t just sit, it works for you.

*APY = Annual Percentage Yield. Rates are subject to change. Dividends are paid monthly unless otherwise noted. Early withdrawal penalties may apply to certificates. Membership eligibility required. Federally insured by NCUA.