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What is the difference between Apy and APR?

Annual percentage yield (APY) refers to how much interest you earn on savings and takes compound interest into account. Annual percentage rate (APR) focuses on how much interest you'll pay for money you've borrowed. The terms are often confused because both are used to calculate interest for investment and credit products.

Is higher APY better than lower APR?

Typically, the higher the APY, the better — because you can earn more money. But the lower the APR, the better because you'll be paying less money in interest charges. As mentioned above, APY refers to the amount of interest an account earns over a year. In calculating APY, banks factor in the compound interest these accounts accrue.

What is the difference between APR and APY on a CD?

A CD's APY is the interest you'll earn over a year, including compounded interest, as long as you don't withdraw any of your earnings. Both APR and APY can help you manage your personal finances. The more frequently the interest compounds, the greater the difference between APR and APY.

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