APR vs APY

Ever wondered what the difference between APR and APY is? And why credit cards always quote APR and banks always quote APY? What difference does it make if we quote APR or APY? From a lenders point of view we always like to get a bigger number, thats why we get APY quoted from a savings/checking account. From a borrowers point of view, we like to get lower numbers. Thats why you get APR quoted.

Here is something from a website: studentplatinum

Basically, APR = Period Rate x Periods per Year
APY = (1 + Period Rate) ^Periods Per Year - 1

so when a credit card quotes a 12% APR, you actually end up paying 12.68% by the end of APY.
And when bank says it has a CD with APY 12.68% all you are getting at the end of one month is 1% of what you put in.

here is another good article from investopedia

So next time you got two different options, make sure you compare apples to apples and get the numbers to correct units. (isn't it a basic engineering principle ??)