What do APY and APR mean?

What is APY?

APY (Annual Percentage Yield) measures the interest you could earn over the course of a year. APY is expressed as a percentage based on the compound interest you earn on the principal dollar amount in your account. This typically applies to savings accounts, certificates of deposit, and money market accounts. 

How APY is calculated:

APY = (1 + Periodic Rate)Number of periods – 1

APY example:

$3,000 in a savings account that earns 1.00% APY* and compounds monthly = $30.14 yearly interest earned. 

What is APR?

APR (Annual Percentage Rate) measures the rate the lender will charge you over the course of a year. APR is expressed as a percentage. This typically applies to credit cards, mortgages, personal and car loans.

How APR is calculated:

APR = Periodic Rate x Number of Periods in a Year

APR example:

$3,000 credit card balance that charges 12% APR⁑  = $188 yearly interest paid ($15.66 monthly interest paid).