What the two numbers mean
An APR (annual percentage rate) is a yearly rate before compounding. Divide it by the number of compounding periods and you get the rate added each period: 5% APR compounded monthly is 0.4167% a month. The APY (annual percentage yield) is what that does over a whole year once each period's interest starts earning interest of its own.
APY = (1 + APR ÷ n)n − 1
continuous: APY = eAPR − 1
back again: APR = n × ((1 + APY)1/n − 1)
Worked example: 0.05 ÷ 12 = 0.0041667, and 1.004166712 = 1.05116, so 5% APR compounded monthly is an APY of 5.116%. On $10,000 that is $511.62 in a year rather than $500.
US savings accounts quote an APY because the Truth in Savings rules (Regulation DD) require it, worked out as APY = 100 × [(1 + interest ÷ principal)365 ÷ days in term − 1]. Loans and credit cards quote an APR under the Truth in Lending rules (Regulation Z). The same arithmetic runs in reverse on debt: a 22% card APR charged daily grows an unpaid balance by about 24.6% a year.