A bank advertises one rate, and then the contract mentions another one - the "effective" rate. The gap is not a trick; it comes from how often the interest joins the deposit. Here it is in numbers.
Where the effective rate comes from
Put 100 000 ₴ away for a year at 12.63 % a year - the NBU's average rate on new hryvnia deposits of up to a year (August 2026). If the interest is paid once at the end of the term, you get exactly 12 630 ₴ before tax. But if it is added to the deposit every month, the next month's interest is calculated on a larger balance.
Over a year that comes to 13 208 ₴ instead of 12 630 ₴ - 578 ₴ more out of the same rate.
Banks express this through the effective rate: with monthly compounding, 12.63 % becomes 13.39 % a year. It is worked out before tax - what would accrue if the full interest joined the deposit each month. Tax is withheld from every accrual, so a smaller amount compounds, and the actual result is 13 208 ₴ rather than 13 387 ₴.
The compounding frequency matters
The less often interest joins the principal, the smaller the result. On the same terms (100 000 ₴, one year, 12.63 %, 23 % tax):
| Compounding | Balance at the end | Effective rate (before tax) |
|---|---|---|
| monthly | 110 170 ₴ | 13.39 % |
| quarterly | 110 086 ₴ | 13.24 % |
| once a year | 109 725 ₴ | 12.63 % |
The gap between monthly and yearly is 445 ₴ per hundred thousand. Not a fortune, but it comes for free: the terms are identical, only one line of the contract differs.
Payouts to a card are yearly compounding in disguise
If the interest goes to your card every month, the principal never grows. Over a year you receive 9 725 ₴ in payouts and the deposit still holds 100 000 ₴. The total matches yearly compounding exactly - the money is just in your hands rather than on the deposit.
Choosing between them is a choice between slightly more profit and monthly access to the money, not between a good deal and a bad one.
What tax takes
The bank withholds 23 % from every interest payment: 18 % personal income tax plus a 5 % military levy. That turns a 12.63 % rate into 9.73 % net.
In the example above, 13 208 ₴ was accrued, 3 038 ₴ went to the state, and 10 170 ₴ reached the depositor. It is withheld automatically - there is no return to file.
Why February earns less
Interest accrues over the actual number of days in the period. A period runs from the opening date to the same date next month, so February gives 28 days and March 31 - and the amounts differ even though the rate never moved.
That is how banks do it, and how this calculator does it: the schedule shows every period on its own, day count included. It is also why the figures in this article depend on the opening date: if the term takes in 29 February, the result shifts by a few hryvnias.
A long term multiplies the difference
Over a year the gap between the schemes is a few hundred hryvnia, but it accumulates. The same 100 000 ₴ at 12.63 % with monthly compounding turns into 133 720 ₴ over three years - a profit of 33 720 ₴ against 29 175 ₴ with payouts to a card.
The short version
- The effective rate is not marketing, it is what compounding produces.
- The more often interest joins the deposit, the higher that rate.
- The 23 % tax comes out of every payment and visibly lowers the real result.
- When comparing bank offers, look at the effective rate and the compounding frequency, not just the number in the ad.
Put your own figures into the deposit calculator - it shows the effective rate, the tax, and a month-by-month schedule.