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What is the difference between APY and APR?
APR (annual percentage rate) is a yearly rate without compounding. APY (annual percentage yield) includes compounding: interest earned on earlier interest, based on how often it is added. The same underlying rate shows a higher APY than APR when it compounds.
What it means for you
A crypto product can quote APY to look larger, and either figure may be a current rate that changes daily rather than a promise. If rewards are paid in a token that falls, the yield in dollars can be negative. Check which figure is shown, how often it compounds, and what token pays it.
How it works
APR states a yearly rate without compounding. APY folds in compounding over a 365-day year: in the US, Regulation DD computes it as 100 × [(1 + interest ÷ principal)^(365 ÷ days in term) − 1], so it depends on how often interest is added. The more often a rate compounds, the further APY sits above APR. The regulation's own example: interest of 61.68 on a deposit of 1,000 over 365 days is an APY of 6.17%.
An example
Say a product quotes 12% APR compounded monthly. Each month adds 1%, and interest earns interest, so after a year 1,000 grows to about 1,126.83: an APY of about 12.68%. Compounded daily, the same 12% APR gives an APY of about 12.75%.
Sources: HelpWithMyBank.gov (OCC): Glossary, CFPB: Regulation DD, Appendix A, Annual Percentage Yield Calculation · checked 4 October 2026
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