What is the difference between APR and APY?

Modified on Wed, Apr 14, 2021 at 4:07 PM

All banks report interest rates two ways: Annual Percentage Rate (APR) and Annual Percentage Yield (APY). APR is the interest rate paid, typically calculated daily and paid monthly. APY takes into account the effects of compounding interest.

All online banks list their rates as APY, as that is the effective interest rate you are earning.

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