Annual Percentage Rate (APR)

Annual percentage rate, or APR, is the yearly cost of borrowing or the yearly rate paid on funds, expressed as a simple percentage without compounding. A loan quoted at 12 percent APR charges 1 percent per month, and US lenders are required to disclose APR under the Truth in Lending Act of 1968.

Why it matters

APR exists to make credit comparable. Because it must fold certain fees into a single standardized number, borrowers can line up a mortgage, a credit card, and an auto loan on equal terms. The catch is compounding: APR understates the true annual cost whenever interest compounds more than once a year. A credit card at 24 percent APR compounding daily actually costs about 27 percent over a year, which is the annual percentage yield.

The convention runs both directions: lending platforms often advertise APR for what borrowers pay while quoting APY for what depositors earn, since the second number always looks larger.

In the gold vs bitcoin debate

Neither gold nor bitcoin carries a native interest rate; any APR attached to them comes from a counterparty. Gold lease rates and bitcoin lending yields both compensate the owner for surrendering custody, and the collapses of several crypto lenders in 2022 showed what those percentages were really pricing: default risk. A quoted rate on a bearer asset is never free money, it is a credit decision.