apr or annual percentage rate and apy, annual percentage yield, are two terms you'll see anytime you borrow money such as taking out an ? loan or applying for a credit card. both terms are expressed as percentages but these two numbers have slightly dissimilar meanings and are calculated differently. the major difference between apr and apy is that apy accounts for the effect of compound interest while apr is based on simple interest. it is important to understand these differences so you can understand the terms of your loan or credit card agreements. you need to know how much interest you will really be paying and how it's calculated. companies can use the difference between apr and apy to make the terms of an agreement seen more appearing. for example. when taking out a mortgage, if the apr is 5%, the apy for the interest rate you really pay would be 5.12% if your mortgage interest compounds monthly. though the difference seems small, it is significant over the length of a 15 or 30 year mortgage. in comparison, a credit card that charges an apr of 12% will have an apy of 12.68% if the interest compounds monthly. if you carry a balance on your credit card and you're looking at apr instead of apy, then you'll pay significantly more interest than are expected. thus, consumers should focus on apy not apr when borrowing money.
- annual percentage rate（apr）・・・年率
- annual percentage yield（apy）・・・年利
- compound interest・・・複利
- simple interest・・・単利