APR vs. APY: What’s the Difference? 

You’ve probably seen the terms APR and APY on ads for credit cards, loans, and savings accounts—but what do they actually mean? Understanding the difference helps you make smarter choices with your money, whether you’re saving or borrowing. 

What Is APR? 

APR stands for Annual Percentage Rate. 
You’ll see it on: 

• Loans 

• Credit cards 

• Mortgages 

What it means: APR shows how much you’ll pay to borrow money. It includes interest plus certain fees. The higher the APR, the more you’ll pay over time. 

What Is APY? 

APY stands for Annual Percentage Yield. 
You’ll see it on: 

• Savings accounts 

• Money market accounts 

• Certificates of Deposit (CDs) 

• Even some Checking Accounts! Check out our Benefits Checking Account with a 5.15% 

What it means: APY shows how much money you can earn on your savings in one year. It includes compounding interest—so the more often interest is added, the more you earn. 

APR vs. APY: What’s the Big Difference? 

Here’s an easy way to remember it: 

Key Difference: 
APY includes compounding (interest on your interest), while APR does not. 

Why It Matters to You 

• Saving? Look for a higher APY. This helps your money grow faster. 

• Borrowing? Look for a lower APR. This means you’ll pay less to borrow. 

👉 Pro Tip: Watch out for hidden fees or complicated terms. Always read the fine print! 

Quick Tips to Remember 

• APR = what you pay (loans, credit cards) 

• APY = what you earn (savings, CDs, money markets) 

• Not all savings accounts are the same—some offer higher APY if you keep more money in them 

• Some loans have variable rates, which means the APR can change over time 

• If you pay off your credit card balance in full and on time each month, you can avoid paying interest (APR). 

The Bottom Line 

Now you know: 

• APR = what you owe 

• APY = what you earn 

This knowledge gives you the power to choose the right accounts, loans, and credit cards with confidence.