From what I've read, typically "APY" typically refers to the effective interest rate of an account (or loan) over the year, while accounting for compounding effects -- for instance,
APY, or annual percentage yield, is a term that applies to deposit accounts. APY is a percentage rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding for a 365-day period.
But the estimated earnings calculator for this same bank implies the opposite: https://www.ally.com/bank/online-savings-account/
Entering a $10,000 initial balance calculates $100.50 in earnings over 12 months, not the $100.00 you'd expect if the rate included compounding effects. Instead, this value is consistent with a 1% rate split into 365 compounding periods: 10000 * (1 + .01/365) ^ (365) = 10100.50
Another bank's online calculator (bankofinternet -- can't post the second link due to low rep) shows the same effect, but also refers to "APY".
Are the banks using the wrong term, are the calculators wrong, or is my understanding of the term APY wrong?