What is the difference between Apy and APR?

The APR reflects the effective percentage that the borrower will pay over a year in interest and fees for the loan. APY and APR are both standardized measures of interest rates expressed as an annualized percentage rate. However, APY takes into account compound interest while APR does not.

What is the difference between interest rate and APY?

The interest rate is the rate of interest earned on an account. For example, your bank may pay you an 0.40% interest rate for your savings account. The interest rate and the APY for a deposit account may be the same or different, depending on how the bank sets them. By itself, the interest rate doesn’t consider compounding.

What does APY mean?

APY is the annual percent yield that reflects compounding on interest. It reflects the actual interest rate you earn on an investment because it considers the interest you make on your interest. Consider the example above where the $100 investment yields 5% compounded quarterly. During the first quarter, you earn interest on the $100.