A savings account and a credit card both list a 12% rate. To judge which deal is truly better or worse for you, why can't you just compare the two numbers directly?

The savings 12% is likely APY and the card's 12% likely APR, so they measure different things

The numbers are the same, so both actually cost or pay you identical amounts per year

🔢 APR vs. APY: the tiny letter that quietly costs (or pays) you money

Two accounts both advertise "10%" — but one says APR and the other says APY, and they are not the same number. APR (Annual Percentage Rate) is the simple yearly rate, ignoring what happens when interest gets added back to your balance. APY (Annual Percentage Yield) includes compounding — the effect of earning interest on your already-earned interest during the year.

Here's the catch: whenever interest compounds more than once a year, the APY is higher than the APR. A 10% APR compounded monthly actually works out to about 10.47% APY. The gap looks small, but it grows with the rate and with how often compounding happens.

This is why the direction of advertising is a giveaway. Savings accounts quote the bigger-sounding APY to look generous, while loans and credit cards quote the smaller-sounding APR to look cheap — even though your card's true cost, once monthly interest compounds, is closer to its APY. Comparing an APR to an APY is comparing two different things.

To compare fairly, always line up the same measure. If a rate is compounded only once a year, APR and APY are identical — the difference only appears when compounding kicks in more often.