Note 02

APY versus stated rate

APY attempts to show what a rate means over a year after compounding. A stated interest rate may describe the base rate before that annualized compounding effect. For everyday readers, the key point is not the formula but the comparison rule: compare APY with APY, and compare rate with rate.

When a page highlights 4.9%, check whether the label says APY. Then look for how often interest compounds and whether fees can reduce the effective result. A clean comparison uses the same measurement across options.