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APY
APY, or annual percentage yield, is the rate of dividends earned on a credit union account over a year, taking into account the effect of compounding.
More Details
APY stands for annual percentage yield. It is a measure of the interest rate earned on an investment over a year, expressed as a percentage of the investment's principal. It is similar to the annual percentage rate (APR), which is a measure of the cost of borrowing money, also expressed as a percentage.
Example
If you have a savings account with a 2% interest rate that compounds monthly, the APY on that account would be higher than the APY on a similar account with the same interest rate but that compounds annually. This is because the interest earned on the monthly compounding account is reinvested more frequently, resulting in a higher overall return.
Related Terms
Retirement
The state of exiting the workforce, usually at the end of one's career, and living on savings or pension.
Credit Card
A payment card that allows the cardholder to borrow funds from the issuer to pay for purchases or withdraw cash.
Mortgage
A loan used to finance the purchase of a home, with the property serving as collateral for the loan.