When I went online to check on the new CD I just opened, I noticed something interesting. The bank listed the Annual Percentage Yield (APY) as 1.50%. But the Interest Rate (APR) says 1.49%. So why is my APY higher than the interest rate?
The simple answer is that it’s a math thing. And the power of compounding. But I realized some of you might want to understand more about that. Is the bank sneaking .01% for themselves to pay for wild parties? No. Let me explain.