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APR and APY: what the difference means
One describes what you pay to borrow, the other what you earn when you save.
APR stands for annual percentage rate. It is the yearly cost of borrowing, including interest and certain fees, and it is what you see on loans and credit cards.
APY stands for annual percentage yield. It is the yearly return on savings, and it includes the effect of compounding, which is interest earning interest during the year. That is why APY is a little higher than the stated rate for the same account.
When you compare savings accounts, compare APY to APY. When you compare loans, compare APR to APR. Mixing the two is the most common mistake.
