By Avery Mills | Feb 18, 2021 8:13:00 AM

704When opening accounts and applying for loans, you may see the terms APR and APY. If you haven’t gone through either of these processes, you may not be sure what they mean. While they both function as ways to measure interest, they do have differences. Here is some more information on these terms and how you are affected by them.


APR stands for Annual Percentage Rate. APR is how your interest is calculated on credit cards and personal, student, home, and auto loans. This is broken down by a simple interest rate of the period of a year.


APY stands for Annual Percentage Yield. APY is used to calculate your interest on savings, checking, CDs, and IRA accounts. This type of interest takes compounding, or building interest using interest, into account. When looking at an APR for a savings account, the higher the better. You are more likely to find a higher interest with a CD than a regular savings account.

Topics: interest

Author: Avery Mills