APR and APY are two important terms in finance, especially when it comes to investments and savings accounts.

APR stands for Annual Percentage Rate, which refers to the interest rate charged on a loan or credit product over a year. It includes fees and compound interest, giving you a clear picture of the total cost of borrowing.

APY stands for Annual Percentage Yield, which is the rate of return on a savings account or investment over a year. It takes into account compound interest, allowing you to see the total amount of interest earned.

Key differences:

- APR is used for borrowing (loans, credit cards)

- APY is used for saving and investing (savings accounts, certificates of deposit)

- APR shows the cost of borrowing

- APY shows the return on investment

When comparing rates, make sure to check if it's APR or APY to understand the true cost or return!