Banking & Credit · BNK-007
APR vs APY
A source-linked chapter designed to teach the subject itself, not a generic lesson template.
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Learning objectives
Learning objectives
By the end of this lesson, you should be able to define APR and APY, explain why APR belongs primarily to borrowing and APY to deposits, distinguish both from a simple stated interest rate, explain how fees can affect loan APR and how compounding affects deposit APY, and correctly compare offers without treating APR and APY as interchangeable percentages.
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References & evidence
Source library for this chapter
These are the linked sources supporting the verified claims used throughout the lesson.
- 01Regulation DD § 1030.2 — DefinitionsOpen source ↗
Consumer Financial Protection Bureau
- 02What is the difference between a loan interest rate and the APR?Open source ↗
Consumer Financial Protection Bureau
- 03Regulation Z § 1026.22 — Determination of annual percentage rateOpen source ↗
Consumer Financial Protection Bureau
- 04Appendix A to Part 1030 — Annual Percentage Yield CalculationOpen source ↗
Consumer Financial Protection Bureau
View claim-by-claim traceability6 verified claims
APR and APY are not opposite versions of the same formula and should not be compared directly as if they measured the same financial relationship.
supported · checked Sep 21, 2026Annual percentage yield (APY) is a deposit-account yield measure reflecting interest paid based on the interest rate and compounding frequency over a 365-day period.
supported · checked Sep 21, 2026For many closed-end consumer loans, APR is broader than the stated interest rate because applicable finance charges and fees can affect the cost measure.
supported · checked Sep 21, 2026Annual percentage rate (APR) is a measure of the cost of credit expressed as a yearly rate.
supported · checked Sep 21, 2026APR is used to compare borrowing costs, while APY is used to compare earnings on deposit accounts.