PickedFinance
Explainer

APR vs APY: what’s the difference?

APY (annual percentage yield) tells you what you’ll earn on savings, including compounding. APR (annual percentage rate) tells you what borrowing costs per year. Compare savings by APY and loans or cards by APR, never one against the other.

By PickedFinance Editorial TeamLast updated

Disclosure: links on this page currently go straight to each provider’s own site, and we don’t earn a commission from them. If we join a provider’s affiliate program later, that will never change which products we include or how we order them. How we make money.

How this page was made: it’s built from each provider’s own terms, rate and fee pages and from regulator sources, all listed at the bottom. We haven’t opened these accounts or products to test them, and we don’t give scores. Every rate shows the day we checked it. Our methodology.

Quick answer

Short answer: APY is the yearly return on a deposit, including compounding, and banks quote savings and CD rates as APY under Regulation DD. APR is the yearly cost of borrowing; on a mortgage it includes some fees, and on a credit card it’s the yearly interest rate, usually charged daily. Compare savings by APY, loans by APR.

Last updated

This explainer uses the federal Truth in Savings rule (Regulation DD, 12 CFR 1030), the Truth in Lending rule (Regulation Z, 12 CFR 1026), which governs credit disclosures including how APR is determined, and the CFPB’s[3][4][5] consumer guidance on APR, read on Nov 10, 2026. The math examples are our own arithmetic, shown step by step so you can check them.

At a glance

APY vs APR at a glance
APY (annual percentage yield)APR (annual percentage rate)
Used forSavings, money market accounts, CDsCredit cards, mortgages, auto and personal loans
Tells youWhat you earn in a yearWhat borrowing costs per year
Includes compounding?Yes, by definitionNo; it’s a yearly rate (cards charge it daily)
Includes fees?NoFor mortgages, yes (points, broker fees and other charges); for cards, it’s the interest rate
Higher is better for…You (the saver)The lender
Federal ruleRegulation DD (Truth in Savings)Regulation Z (Truth in Lending)

APY: what a deposit earns

Regulation DD defines annual percentage yield as “a percentage rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding for a 365-day period.” Because compounding is built in, two accounts with the same APY pay the same over a year, whatever their compounding schedule.

Worked example. An account with a 3.15% interest rate that compounds monthly has an APY of about 3.20%: (1 + 0.0315 ÷ 12)12 − 1 ≈ 0.0320. Compounded daily, the same 3.15% rate works out to about 3.20% as well (≈ 0.03200). On $10,000 left for a year at an unchanged 3.20% APY, you’d earn about $320.

For savings and money market accounts the APY is usually variable, so the bank can change it after you open the account. A CD’s APY is generally fixed for the term.

APR: what borrowing costs

The CFPB[3][4][5] says a credit card’s interest rate is “typically stated as a yearly rate,” called the annual percentage rate. For mortgages, the APR is “a broader measure of the cost of borrowing money than the interest rate”: it reflects the interest rate plus points, mortgage broker fees and other charges, so it’s usually higher than the interest rate.

Credit cards charge APR daily. The CFPB explains that many issuers use a daily periodic rate, the APR divided by 360 or 365 depending on the issuer, applied to each day’s balance and added to it, so interest compounds daily. A 24% APR divided by 365 is about 0.0658% a day (0.0667% if the issuer divides by 360).

Fixed vs variable APR. A variable APR moves with an index such as the prime rate. A “fixed” APR doesn’t follow an index, but the CFPB notes that doesn’t mean it can never change; the issuer generally must notify you first.

How to make the APR not matter on a card

On most cards you pay no interest on purchases if you pay the full statement balance by the due date each month, because of the grace period. The CFPB[3][4][5] notes card companies aren’t required to offer a grace period, though most do on purchases. Carry a balance and you lose it: interest then applies to the unpaid amount and to new purchases from the day you make them.

Comparing offers the right way

  • Savings, money market and CDs: compare APY to APY. Ignore the plain “interest rate” unless both use the same compounding.
  • Cards and loans: compare APR to APR, and for mortgages compare APRs on the same type of loan. The CFPB[3][4][5] warns that an adjustable-rate mortgage’s APR doesn’t reflect its maximum rate.
  • Intro or promotional rates: check when the promotion ends and what APR or APY applies afterward.

Who should skip this

  • Anyone comparing two savings accounts: you only need the APY column, so the quick answer is enough.
  • Mortgage shoppers who need closing-cost detail: the APR is a summary. Use the Loan Estimate’s full cost pages, and talk to the lender.

Frequently asked questions

Is APY or APR better?
Neither: they measure different things. A higher APY is better when you’re saving; a lower APR is better when you’re borrowing.
Why is APY higher than the interest rate?
Because APY includes compounding. A 3.15% rate compounded monthly earns about 3.20% over a year, so its APY is about 3.20%.
Do credit cards use APY?
No. Cards state an APR. Many issuers charge interest daily using a daily periodic rate (the APR divided by 360 or 365), so interest compounds daily on balances you carry.
Can a fixed APR change?
Yes. The CFPB[3][4][5] says a fixed APR doesn’t follow an index, but it can still change; the issuer generally must notify you first and in most cases can apply the higher rate only to new transactions.
Where do I find the APR on a mortgage offer?
On the Loan Estimate, the CFPB[3][4][5] says the interest rate is on page 1 under “Loan Terms” and the APR is on page 3 under “Comparisons.”

Sources

Every source below was opened and read for this page. Providers’ own pages are labeled with the provider’s name; regulator pages are labeled with the agency. Rates and terms change often, so confirm on the provider’s site before you apply.

  1. eCFR: 12 CFR Part 1030 (Regulation DD, Truth in Savings) (ecfr.gov, checked Nov 10, 2026)
  2. eCFR: 12 CFR Part 1026 (Regulation Z, Truth in Lending) (ecfr.gov, checked Nov 10, 2026)
  3. CFPB: What is a credit card interest rate? What does APR mean? (consumerfinance.gov, checked Nov 10, 2026)
  4. CFPB: What is a “daily periodic rate” on a credit card? (consumerfinance.gov, checked Nov 10, 2026)
  5. CFPB: What is the difference between a fixed APR and a variable APR? (consumerfinance.gov, checked Nov 10, 2026)
  6. CFPB: What is a grace period for a credit card? (consumerfinance.gov, checked Nov 10, 2026)
  7. CFPB: Mortgage interest rate vs APR (consumerfinance.gov, checked Nov 10, 2026)
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Best high-yield savings accounts

Every account here is at an FDIC-insured bank, charges no monthly maintenance fee and paid 3.20% APY or more on the bank’s own page on Nov 10, 2026, versus the FDIC’s 0.38% national average for savings. The differences are tiers, minimums and how you move money.

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Best CD rates

A CD locks an APY for a set term in exchange for a penalty if you withdraw early. On Nov 10, 2026, the best rates we found were 5.00% APY for 5 years and 4.60% for 1 year at Sallie Mae, and 4.20% for 6 months at Synchrony.

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Best 0% intro APR credit cards

A 0% intro APR on purchases lets you spread a big expense over months without interest, as long as you pay it off before the intro period ends. We read each issuer’s page on Nov 10, 2026.

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Best balance transfer credit cards

A balance transfer can stop interest on card debt for a while, but almost always costs a fee up front. We read each issuer’s page on Nov 10, 2026 for the 0% length, the transfer fee, the deadline to transfer and the APR that follows.