Kareen MillsFounder & CEO, Friendsgiving Live® · Most Influential Filipina ’23 🏆 Founder of the World’s Largest Friendsgiving Festival for Women | Angel | Keynote | Sugar Mommy™ Media | Psalm 25:1 ✞

APR and APY is hella confusing! #personalfinance

7 Aug 2024 · 1 min

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APR is the interest rate on credit products, APY is for deposits. With $100,000 at 5%, APR gives you $5,000 in interest but APY gives $5,116 because APY includes monthly compounding, where interest earns interest each month.

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APR and APY is hella confusing. This is where the confusion comes in because 5% APR of $100,000 is $5,000, but 5% APY of $100,000 is not $5,000. It is indeed $5,116. APR stands for annual percentage rate, which is generally used on credit products. APY stands for annual percentage yield. APY is generally used in deposit products. So why do we get an extra $116 when it comes to APY? Have you ever heard the power of compounding? Well, this right here is indeed the power of compounding in action. And because APY is calculated every month and paid every month, it's literally stacking up month after month. It's your money making money for you. You know how wealth