APR vs APY
Two ways to express an interest rate; APR ignores compounding, APY includes it.
APR (Annual Percentage Rate) is the stated annual rate, used on loans and credit cards, and required by the federal Truth in Lending Act. It does not include intra-year compounding. APY (Annual Percentage Yield) does include compounding and is the figure you see on savings accounts and CDs under the Truth in Savings Act. For borrowing, compare APRs; for saving, compare APYs. A 20% APR credit card actually charges closer to 22% APY once daily compounding is included.
Inside Finlo
A 60-second lesson that puts this term in context, alongside the others, lives inside the Finlo app.