AER vs APR

AER (Annual Equivalent Rate) is the standardised savings rate, assuming interest is compounded and left in the account for a year. It lets you compare a 4.5% account paid monthly with a 4.6% account paid annually on like-for-like terms. APR (Annual Percentage Rate) is the standardised borrowing rate, including most compulsory fees, used for credit cards, loans, and overdrafts. A representative APR must be quoted in adverts under FCA rules and must reflect the rate at least 51% of accepted applicants will receive. APR understates the real pain of credit-card debt if you carry a balance, because the effective compounding rate (APR / 12, compounded monthly) is higher than the headline.