Financial institutions often speak in terms that are well-known in the industry – and worth knowing for you. Three of the most common terms are Finance Charge, APR and APY.

• Finance Charge: The dollar amount the credit will cost you; the extra amount you pay for borrowing an amount of money
• Annual Percentage Rate (APR): The cost of credit expressed as a yearly rate that includes costs and fees associated with the loan (such as interest and loan processing fees), intended to measure the “true cost” of the loan. The Truth in Lending Act requires lenders to disclose the APR when advertising a rate.
• Annual Percentage Yield (APY): A percentage rate that reflects the total amount of interest paid on the account for a one-year period, based on the interest rate and how often interest is compounded.