Annual Percentage Rate (APR): What Does It Mean?

Annual Percentage Rate (APR) is the yearly cost of borrowing money, expressed as a percentage, including the interest rate plus certain fees. Because it includes fees like origination charges, APR gives you a fuller picture than the interest rate alone, which makes it useful for comparing loan offers side by side. On credit cards, APR is the rate applied to any balance you carry past the grace period. APR doesn't factor in compounding, so it differs from Annual Percentage Yield (APY), the figure you'll see on savings accounts. A lower APR generally means you'll pay less to borrow the same amount.