What does APY mean?

The APY is the “actual rate” someone earns on a balance. Essentially, the APY measures the total amount someone pays in interest while taking the frequency of compounding into account. APY can also be called the EAR (effective annual rate). An APR reflects both the fees and interest rate associated with borrowing or earning money.

What is Apr & APY?

Let’s start with a breakdown of what APR and APY mean. Firstly, APR, which stands for Annual Percentage Rate. You’ll see APRs described in the context of loans, credit cards, mortgages and similar products where you’re borrowing money from a bank or institution.

What are apys used for?

APYs are used more often to advertise interest-earning accounts such as savings accounts, money market accounts, or certificates of deposit (CDs). Lenders are more likely to reference the APR when talking about credit products such as credit cards or personal loans.

How is APY calculated?

The formula for calculating APY is: Any investment is ultimately judged by its rate of return, whether it's a certificate of deposit (CD), a share of stock, or a government bond. The rate of return is simply the percentage of growth in an investment over a specific period of time, usually one year.