I dont understand APY, APR

[Radiance]

I googled it, read about it, don't get it.
My saving account has an APY of 0.20%
What does that mean? Here I hear discussions on APR, not APY...

Thank you

[Broken Arrow]

APR = % annual interest

APY = % annual interest compounded over a year if you were to never touch the interest money.

(Edit: I originally stated monthly, because banks typically pay monthly, but the number reflected is annual. I was wrong. I knew better, but I wasn't paying attention. Very sorry.)

I've always argued that APR is the one that makes the most sense, because it does.

However, because APY also compounds your existing interest over the course of a theoretical year, it makes for better marketing without committing false advertising.

[jIM_Ohio]

APY is a good "equalizer" based on how the APR is compounded.

Some banks issue interest monthly (on a savings account)
some banks issue interest daily (on a CD or money market account)

that frequency means he APR is not equal (a 2% APR on savings and a 2% APR on CD) are not equal. I'd rather have 2% compounded daily that 2% compounded monthly.

[Broken Arrow]

My problem with APY is that it assumes you are not going to touch the interest over the course of a year, whereas APR makes no such assumption.

Also, APR can be calculated daily, and in some cases, it already is. (My mistake for being unclear here.) But not with APY, which has to be scaled up to one year to factor in the assumed interest compounding in order to make accurate comparisons.

But people are used to APY and that's fine.

[Radiance]

Thank you!!! I get it now.
And, time to move my savings 0.2 APY or APR is too low even nowadays.
I am thinking about smarty pig, I only have $2000 right now and I am sending $250 more per month.

[Broken Arrow]

I'm glad you did, despite my pitiful efforts. I would be more than happy to answer anything here since I feel bad about the misinformation. But perhaps it's best to just read this article. In it, it warns people about APR being used deceptively on revolving debts, but the same thing can be flipped around to be just as deceptive when talking about savings, CDs, and anything else that pays us interest.