EyeOnKey terms A–Z
Quick definitions in plain English. Meanings and rules can vary by country and provider.
- AER (annual equivalent rate)
- The yearly interest you would earn after compounding, which allows fair comparison between savings accounts.
- APY (annual percentage yield)
- The US name for the same idea: yearly return including compounding.
- Bonus rate
- An extra rate for a limited period that falls away afterwards.
- Compounding
- Adding interest to your balance so future interest is earned on it too.
- Fixed rate
- A rate that does not change during the stated term.
- Gross rate
- The stated interest rate before tax and without compounding.
- Inflation-adjusted return
- The return you earn after allowing for rising prices.
- Interest payment frequency
- How often interest is paid: monthly, quarterly or yearly. More frequent payments mean slightly higher AER.
- Minimum balance
- The least you must hold to earn the advertised rate.
- Net rate
- The rate after tax has been deducted.
- Tiered rate
- Different interest rates for different parts of your balance.
- Variable rate
- A rate that can change, so your AER may go up or down.
What AER means
AER stands for annual equivalent rate. It expresses the total interest an account would earn over a year if the balance stayed in place, with interest added and itself earning interest — whatever the account's actual payout schedule is.
That is its whole purpose: two accounts, one paying interest monthly and one annually, can advertise the same simple rate while earning different real amounts. AER converts both to a single comparable figure, the way a common currency makes prices comparable.
AER vs the flat or nominal rate
A nominal rate is the simple annual rate before compounding. When interest is paid once a year, AER and the nominal rate are the same. When interest is paid monthly or quarterly, AER is slightly higher, because each interest payment starts earning interest itself.
Some countries use different labels for the same idea — APY in the United States, effective annual rate elsewhere. The numbers may be labelled differently but the comparison logic travels: always compare the compounded figure, never the simple one, when products differ in payout frequency.
How to use AER when comparing
Compare AER to AER, on the same date, and check that both figures are for the same balance conditions. Some promotional rates apply only to a slice of the balance, or only for the first months — the AER may be stated for the headline slice rather than a typical deposit.
Also read what happens after any bonus period ends. A high AER that lasts twelve months followed by a much lower standard rate can average out below a modest rate that holds steady. The savings rate comparison calculator puts two accounts' trajectories side by side.
What AER does not tell you
AER says nothing about access: an account can pay a strong rate while locking money away or limiting withdrawals. It also says nothing about taxes on interest, which differ by country and can change which account is genuinely best for you.
And it is not a forecast: variable rates can move, so the AER in force today is not guaranteed to be the rate paid next year. Fixed-term accounts remove that uncertainty; flexible ones trade certainty for access.