Banks rarely compound once a year. The fine print says compounded monthly or semi-annually, and the formula grows two small sockets to cope: $A = P\left(1 + \dfrac{r}{n}\right)^{n t}$ (read aloud: A equals P times one-plus-r-over-n, to the power n t). The yearly rate gets SPLIT into $n$ slices, and the clock ticks $n$ times as often. Split the rate, multiply the ticks — both, always. The classic slip is forgetting the split and charging the full yearly rate every period.

Does faster compounding help? A little — never as much as the ads imply. The honest measure of any quoted rate is the effective annual rate, $\mathit{EAR} = \left(1 + \dfrac{r}{m}\right)^{m} - 1$ — EAR equals one-plus-r-over-m, to the m, minus one. Here $r$ is still the quoted yearly rate as a decimal, and $m$ is the same counter $n$ was: how many times a year the bank compounds (semi-annually means $m = 2$). What comes out is what the year actually pays once the compounding is counted. It is how you compare two banks telling two different stories.