APR vs APY

It is important to understand the difference between annual percentage rate (APR) and annual percentage yield (APY). We hope to give you a better understanding of APR and APY.

  • Annual Percentage Rate (APR) is the annual rate of interest without taking into account the compounding of interest within that year.
  • Annual Percentage Yield (APY) takes into account the effects of compounding and is a better measure of what you are actually earning.
  • Here is an example to show the difference between APR and APY:
    • You deposit $5,000 into a CD earning 5% APR
    • The period rate is 5%/365, or .01% per day
    • APY=(1+Period Rate)^Periods Per Year-1
    • APY=(1+.0001)^365-1
    • APY=5.13%
    • So you are actually earning 5.13% interest per year due to compounding.
 
Accounts:
Savings Accounts
Checking Accounts
Online Banking
 
Investopedia.com
Deposit Calculators
 
Contact Us
NCUA Insurance
 
 
This credit union is federally insured by the National Credit Union Administration.
Privacy Policy     Terms Of Use     Patriot Act