APY vs. APR
Promi compares the rate on each account against the current national average for that account type, so a savings rate and a card rate are each measured against their own market rather than against each other.
Three different measures, used for three different kinds of account:
- APY
- Annual percentage yield, for deposit accounts. Includes the effect of compounding within the year, so it is what the balance actually earns.
- APR
- Annual percentage rate, for borrowing. Excludes intra-year compounding, which is why a card's effective annual cost exceeds its stated APR.
- Return
- For investment accounts. A historical average rather than a contracted rate, which makes it the only one of the three that is not promised in advance.
APY and APR are not directly comparable, since one includes compounding and the other does not. Comparing a 4.5% APY against a 5% APR understates the gap between them.
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