Author
BetterProduct Editorial Team - Editorial standards and multilingual quality review
Learn the difference between APR and APY and how to use each when comparing financial products.
BetterProduct Editorial Team - Editorial standards and multilingual quality review
Comparison rows are reviewed against public definitions and representative planning scenarios.
April 2026
Understand tradeoffs, not just formulas, before committing to one option.
English public edition reviewed against the same source formulas used in maintenance.
| Criteria | APR (Annual Percentage Rate) | APY (Annual Percentage Yield) |
|---|---|---|
| Full Name | Annual Percentage Rate | Annual Percentage Yield |
| Compounding | Does not account for compounding | Accounts for compounding frequency |
| Typical Use | Loans, credit cards, mortgages | Savings accounts, CDs, investments |
| Which Is Higher | Lower number for same product | Higher number for same product |
| Includes Fees | Yes — includes lender fees and charges | No — only reflects interest rate |
| Legal Requirement | Lenders must disclose APR (Truth in Lending Act) | Banks must disclose APY (Truth in Savings Act) |
| Best For Comparison | Comparing loan costs | Comparing savings account returns |
| Formula | Periodic rate × number of periods | (1 + r/n)^n - 1 |
Use APR when comparing loans, credit cards, and mortgages. The APR gives you a standardized way to compare the true cost of borrowing across different lenders and products. A lower APR means lower total borrowing costs, though always check if fees are included.
Use APY when comparing savings accounts, CDs, and money market accounts. APY reflects the actual return you'll earn including compounding, making it the most accurate measure for comparing savings products. A higher APY means more money earned on your deposits.
APR and APY are two sides of the same coin — APR is used for borrowing costs, APY for savings returns. When borrowing, look for the lowest APR. When saving, look for the highest APY. Be aware that lenders advertise APR (lower number) while banks advertise APY (higher number) — both are required by law.