APY

What does APY stand for?

Annual percentage yield

APY stands for annual percentage yield. It’s a way to measure how much interest you earn on your money when you leave it in an account for a whole year. The cool thing about APY is that it counts in compounding interest, which can happen monthly, every three months, or twice a year.

Now, you might be wondering how APY is different from APR. Well, APR is usually used for money you borrow, like credit card debt or a mortgage. Unlike APY, APR also includes any fees you have to pay. But APY only looks at the interest that builds up over time.

So, if you want to figure out how much interest you’re going to earn from your savings account, you’d look at the APY. But if you’re trying to calculate the cost of borrowing money, you’d use the APR. It’s a handy way to compare different financial products and make smarter decisions with your money.

Example for using ‘APY’ in a conversation

Hey, I just found out about this thing called APY. Do you know what it means? πŸ€”

Yeah! APY stands for Annual Percentage Yield. It’s a way to measure the interest you earn on your money in a savings account over a year. πŸ“ˆ

Oh, got it! So, does it include any fees or just the interest? πŸ’°

APY only considers the interest you earn through compounding, which can be monthly, quarterly, or semi-annually. It doesn’t take into account any fees like APR does. πŸ‘