TAE vs TIN (and APY)
When you sign up for a deposit, a high-yield account, a mortgage or a loan, you will see two percentages that look the same but are not: the TIN and the TAE (the Spanish terms). Knowing how to tell them apart is what lets you compare offers without being fooled by a pretty number.
TIN: the nominal interest rate
The TIN (nominal interest rate) is the "pure" rate of the product: the percentage applied to the capital to calculate interest. It does not include fees, costs or how often interest is paid. It is useful for calculating payments or interest, but it is no good for comparing products, because two offers with the same TIN can cost (or yield) different things.
TAE: the annual equivalent rate
The TAE (annual equivalent rate) is the real annual cost or yield of the product. It includes:
- The TIN.
- The fees and some associated costs.
- The compounding frequency, that is, how often interest is paid or added (monthly, quarterly, annually…).
That is why the TAE is the number you should use to compare products of the same type across different banks. By construction, on a deposit the TAE is usually slightly higher than the TIN (because it compounds), while on a loan the TAE is higher than the TIN because of the fees.
Why the compounding frequency changes the result
Imagine a deposit with a 3 % TIN. If interest is paid once a year, the TAE is exactly 3 %. But if it is paid monthly and reinvested, the TAE rises a little, because you start earning interest on interest:
TAE = (1 + TIN / m) ^ m − 1
where m is the number of times it compounds per year. With a 3 % TIN and monthly payment (m = 12):
TAE = (1 + 0.03 / 12)¹² − 1 ≈ 3.04 %
The difference is small at low rates, but it grows at higher rates.
And the APY? It's the "American" TAE
If you read international blogs or products (especially crypto or US banks), you will see the term APY (Annual Percentage Yield). It is exactly the same concept as the TAE of a savings product: the annual yield with compounding already included. Its loan equivalent is the APR, similar to the TIN. In short: APY ≈ savings TAE and APR ≈ loan TIN/TAE.
Quick table
| Concept | Includes fees? | Includes compounding? | What is it for? |
|---|---|---|---|
| TIN | No | No | Calculating the payment or interest |
| TAE | Yes | Yes | Comparing products with each other |
| APY | (savings) | Yes | Anglo equivalent of the savings TAE |
What the TAE does NOT tell you on a mortgage
The TAE is the best figure for comparison, but it has an important blind spot: on a variable-rate mortgage, the TAE shown in the offer is computed assuming the Euribor never changes for the whole life of the loan. It's a still photo of a rate that will move. So comparing only first-year TAEs between a fixed and a variable mortgage can lead you to the wrong conclusion. Also look at the spread, the tie-in products (insurance, cards) and what happens if rates rise.
Common mistakes
- Comparing deposits by TIN when one pays monthly and another at maturity: they yield differently despite the same TIN.
- Focusing on a loan's low TIN and ignoring arrangement or study fees that the TAE does capture.
- Taking a crypto "X % APY" as a guaranteed TAE. The calculation concept is the same; the risk behind it is not.
Between two offers of the same type, the one with the better TAE almost always wins, not the one with the flashier TIN.