Generally the interest will be paid in terms of annual percentage rate (APR) and annual percentage yield (APY). However there are many differences between the two. It is important for you to know these differences to know how your money is working for you.
It’s all about compounding
APR is nothing but the annual interest rate that is actually paid for the investment you made. However it does not take into effect how interest is applied. While APY take into account how often the interest is applied to the balance that may range any where between daily to annually. For instance when you deposit an amount of 10,000 $ in an APR of 5%, you will have an interest of 500$ per year. If the same amount is deposited in APY and interested monthly,you will get around interest of 0.42% per month .how ever the second month interest rate is calculated for 10042 $ and so on however when you hold APY it will earn an interest of 5.12% .at the end of one year
Always compare APY to APY
You will not get a clear picture when you compare APY of one account with APR of another account as the number may not reflect will one is better .so calculate the APY of both the account which will help you to get a clear picture of which account will yield more interest