◈ GLOSSARY · PERSONAL FINANCE
APR vs APY.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
APR (annual percentage rate) is the simple annualized rate before compounding; APY (annual percentage yield) includes the effect of compounding within the year. Loans quote APR because it looks lower; savings accounts quote APY because it looks higher. They're the same number only when interest compounds exactly once a year.
◈ IN PRACTICE
Example
A savings account paying 4.88% APR compounded monthly works out to 4.99% APY. A credit card at 22% APR compounded daily is effectively closer to 24.6% APY on a carried balance.