FAQ: APY vs APR
What is the difference between APY vs APR rates for investments?
- The interest rates published on our website are APY, Annual Percentage Yield. We do this so that you can compare interest rates with banks and investment managers. APY is the rate that banks and investment managers publish.
- APR, Annual Percentage Rate, will always be less than APY. APR is the actual rate used to calculate how much interest you will earn, usually by contract. This is the rate that will be on your statements, maturity notices, or any other communications that are specific to your investment accounts.
- APR represents the annual percentage interest rate paid to investors.
- APY represents the amount the investor will earn if they allow their interest to compound. This means that the interest earned is added to the investment, converting interest to principal. The invested balance increases, then the dollar amount earned at the same interest rate will be a little higher every month.
- Every month, we calculate how much interest each investment earned.
- Some investors choose to receive a payment for that interest; they will earn APR.
- Others choose to add the interest to the total investment; they will earn the APY.