Which is better for comparing savings accounts?

Always use APY for savings. Two accounts can have the same APR but different APYs if they compound at different frequencies. APY reflects the actual amount you will earn in a year.

Why do credit cards show APR instead of APY?

Credit cards use APR because regulations require it, and it makes the rate appear lower than the actual cost. Credit card interest compounds daily, so the effective APY is typically 1-2% higher than the stated APR.

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GuidesMay 12, 20265 min read

APY vs APR: What Is the Difference?

APY and APR sound similar but mean very different things. Learn which metric matters for savings, loans, and credit cards.

Guide overview

These two acronyms differ by just one letter, but choosing the wrong one could cost you thousands.

APY and APR sound similar but mean very different things. Learn which metric matters for savings, loans, and credit cards.

Key points from the source guide

The source guide defines APR as the annual borrowing rate before compounding.

It defines APY as the annual yield after compounding, which is more useful for savings products.

It gives a simple memory rule: APR is usually what you pay, APY is what you earn.

Try the related Toolars calculators

This migrated guide links to these Toolars tools: apy-calculator, compound-interest.

Tools mentioned in this article

Frequently asked questions

Which is better for comparing savings accounts?: Always use APY for savings. Two accounts can have the same APR but different APYs if they compound at different frequencies. APY reflects the actual amount you will earn in a year.
Why do credit cards show APR instead of APY?: Credit cards use APR because regulations require it, and it makes the rate appear lower than the actual cost. Credit card interest compounds daily, so the effective APY is typically 1-2% higher than the stated APR.