Annual Equivalent Rate Calculator
Use this calculator to find your Annual Equivalent Rate (AER). Simply enter the interest rate and compounding frequency to find out your annual return.
See Your True Interest Rate – Adjust the values to calculate the AER after compounding
Annual Equivalent Rate (AER)
8.00% gross interest compounded daily is an AER of 8.33%.
How This Calculator Works
Your Inputs
| Input | What It Means |
|---|---|
| Gross Interest Rate (%) | The interest rate before the effects of compounding are accounted for. |
| Compound Frequency | How often interest is added to your balance each year. The more frequently interest compounds, the higher your actual return will be. |
Understanding Your Results
| Result | What It Means |
|---|---|
| Annual Equivalent Rate (AER) | The rate of return accounting for compounding. It translates different gross rates and compounding frequencies into a single, comparable percentage across products. |
What is AER and Why Does it Matter?
Annual Equivalent Rate (AER) is a metric that tells you how much actual interest your savings could earn you over a 12-month period with one product versus another.
Savings accounts can calculate and pay out interest in different ways. The AER standardises these terms and conditions into one rate, allowing you to accurately compare returns across different accounts on a like-for-like basis.
It prevents banks from hiding low actual returns behind high short-term promotional rates, giving you a clearer picture of your potential earnings.
Compounding Frequency Explained
Compounding frequency is how often interest is added to your savings account. Common options are yearly, monthly, and daily.
The gross rate stays the same regardless of how often compounding occurs. What changes is how much that rate actually earns you. When interest is added to your balance more frequently, it starts earning its own interest sooner. That produces a higher return than the same gross rate compounded less often.
Learn more about the power of compound interest with our dedicated compound interest calculator.
For example, a savings account with a 3% interest rate produces different returns depending on how often interest is calculated and applied.
- If applied annually, you’d earn exactly 3%.
- If applied monthly, you’d earn 3.04% over the full year.
Did you know?
Irish savings accounts typically compound monthly or annually.
Using Your Result to Compare Real Irish Accounts
You can use your AER result to see how real savings accounts stack up against each other. With Irish interest rates constantly shifting, having a specific target in mind makes it much easier to separate the good deals from the bad. The goal is to ensure you aren’t leaving money on the table by settling for a sub-par rate with your current bank.
It’s never been easier to compare savings accounts. Our free savings accounts comparison tool compares 260+ of the best Irish and European accounts available to Irish savers, all vetted and reviewed by our experts.
What This Calculator Does Not Include
Taxes: Interest earned on savings in Ireland is subject to Deposit Interest Retention Tax (DIRT) at 33%. The AER shown is a gross figure and does not reflect what you actually take home after tax.
Fees and Account Charges: Some savings products carry maintenance fees or conditions that reduce your effective return below the AER shown.
Introductory or Bonus Rates: Many Irish savings accounts advertise an AER based on a rate that only applies for an initial period. This calculator assumes the rate you enter applies for the full year, without conditions.
Frequently Asked Questions
The gross rate is the headline rate before compounding is applied. The AER is what that rate actually produces over a full year. Two accounts with identical gross rates but compounding at different frequencies will produce different AERs.
Irish and EU regulations require it. Without a standardised rate, two accounts that calculate interest in different ways could advertise the same gross rate but deliver different returns.
Yes, at the same gross rate, more frequent compounding produces a better return. The difference between yearly and monthly is worth paying attention to. Beyond monthly, the gains to be had from increasing compound frequency become quite small.
No. AER is always quoted as a before-tax gross rate. Irish financial institutions automatically deduct DIRT from interest earnings before paying it into your account. That’s why you’ll receive less interest than the advertised AER would suggest.
AER acts as a standardised yardstick which can be used to compare savings accounts accurately. It achieves this by factoring in the effects of compounding over the full year, regardless of how often compounding occurs.
