Annual Percentage Yield (APY) Tips

Video Transcript

"This is financial adviser Patrick Munro, talking about how annual percentage yield works. A lot of individuals don't know what APY, as it's known, and how it works. The basic way it works, is that an interest rate is declared on a financing vehicle, be it a mortgage, be it a car loan, be it a credit card. And annual percentage yield is a way for the institution that's granting the credit to expense and run their business, and then still offer you, based on your credit worthiness the vehicle, financial vehicle you're using, and the interest rate that they are declaring after expenses, is called the APY. Sometimes it is different than the actual interest that's on the note, because of the expense factor that's placed into the investment, or the loan. So, this is Patrick Munro, discussing the mechanics of APY, or Annual Percentage Yield."