Know the Difference Between APR and APY

Interest can add up fast.

So when you borrow or save money, you want to know what your interest rate is.

Problem is, theres APR and APY.

Theyre different animals, and many people dont know the difference.

Its important to understand how these terms work so you know what youre getting into.

So if your credit cards monthly interest rate is 1%, your APR should be 12%.

APR is usually associated with borrowing money or using a credit card.

Annual Percentage Yield (APY) is the rate of return of an interest rate, considering compoundinterest.

Compound interest is interest earned on top of previous principal and interest.

Weve explainedit in more detail, but its basically interest earned on previous interest.

APY is associated with savings.

APR shows you how much interest youre paying annually for a loan or revolving credit.

Update: Weve corrected the article to clarify the original info from Investopedia.

Thanks to reader FinanceGuy44 for bringing this to our attention.

APR and APY: Why Your Bank Hopes You Cant Tell The Difference| Investopedia

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