APR vs APY: what changes the real rate?
APR describes annual borrowing costs under local disclosure rules. APY/EAR includes compounding. Check fees and compare products on the same basis.
The practical difference
APR is commonly used to disclose annual borrowing costs; its treatment of fees depends on local rules. APY expresses the effect of compounding within a year.
For a nominal annual rate r compounded n times per year:
APY = (1 + r/n)ⁿ − 1.
How to compare offers
Use APR alongside fees for borrowing and use APY for deposit growth. Confirm whether a lender’s APR includes mandatory fees under local disclosure law.