APR and APY sound almost identical, and mixing them up is an easy mistake — but one measures what borrowing costs you, and the other measures what saving earns you. * APR, Annual Percentage Rate, applies to money you borrow: credit cards, mortgages, auto loans, personal loans. It's meant to reflect the true yearly cost of that debt, and on many loans it includes more than just the interest rate — origination fees, closing costs, and broker fees can all get folded into a mortgage's APR, which is why the APR on a loan is often a bit higher than its stated interest rate alone. * APY, Annual Percentage Yield, applies to money you deposit and earn interest on: savings accounts, CDs, money market accounts. The key difference from a simple interest rate is that APY accounts for compounding — earning interest not just on your original deposit, but on the interest that deposit has already earned, which is why a bank might advertise an APY slightly higher than its stated interest rate. * The practical rule that follows from all this: when you're shopping for a place to put savings, look for the highest APY you can find, since a higher number means more money earned. When you're shopping for a loan or credit card, look for the lowest APR you can find, since a higher number there means more money paid out of your pocket. * Because APR can bundle in fees beyond the raw interest rate, comparing two loans by APR alone — rather than just their advertised interest rate — is usually the more accurate way to see which one actually costs less overall.