APY vs APR: What’s the difference?
If you’ve ever opened a savings account or applied for a loan, you’ve probably seen the terms Annual Percentage Yield (APY) and Annual Percentage Rate (APR). They look similar, but they mean very different things—and knowing the difference can help you make smarter financial decisions.
What Is APY?
Annual Percentage Yield (APY) is used to show how much interest you’ll earn on deposit accounts like savings accounts or CDs. It includes compound interest, which means you earn interest not just on your original deposit, but also on the interest that’s already been added.
At ZYNLO, interest is compounded daily, which means your money grows a little every single day—and that adds up over time. The more often interest is compounded, the more you earn. Other common compounding frequencies include monthly, quarterly, semi-annually, and annually, and each affects how much interest you ultimately earn.
What Is APR?
Annual Percentage Rate (APR) is used to show how much it costs to borrow money. You’ll see it on credit cards, auto loans, mortgages, and personal loans. APR includes fees like origination charges or broker costs, but it does not include compounding interest
For example, if you take out a personal loan with a 6.00% APR, that rate includes any upfront fees, giving you a clearer view of the total cost over the year.
Federal law requires lenders to disclose APR so consumers can compare loan offers fairly.
Why It Matters
Understanding the difference between APY and APR helps you:
- Earn more: Look for the highest APY when choosing savings, money market or CDs.
- Spend less: Look for the lowest APR when comparing loans or credit cards.
- Avoid confusion: APY and APR are not interchangeable. APY is for savings; APR is for borrowing.
