APY is designed to show deposit earnings with compounding included. APR is commonly used to express an annualized borrowing cost, though exactly which fees are included depends on the product and disclosure rules.
Compounding changes the comparison
A savings account can pay interest on earlier interest. APY incorporates that effect so accounts with different compounding schedules are easier to compare.
The stated nominal rate may be lower than the APY.
Loan disclosures need more than one number
APR can make loans with different rates and certain fees more comparable, but it does not always capture every cost or behavior. Credit card interest also depends on balances and timing.
Read the dollar disclosures and agreement.
Match the measure to the question
For deposits, ask what the account earns after requirements and fees. For debt, ask the total dollars paid under a realistic payoff schedule.
A familiar percentage is useful only when its definition is clear.
Sources
- Consumer Financial Protection Bureau, What Is APR?
- Federal Deposit Insurance Corporation, Deposit Accounts and APY.