AER vs APR: the two interest rates explained simply
By SendPay Business · · 2 min read
AER and APR are both yearly interest rates, but they are used for opposite things. AER tells you what you earn on savings. APR tells you what borrowing costs. Both exist so you can compare products on the same basis.
AER: for savings
AER stands for Annual Equivalent Rate. It shows what you would earn over a year once interest is added and then earns interest itself, known as compounding. It lets you compare a savings account that pays monthly with one that pays yearly.
APR: for borrowing
APR stands for Annual Percentage Rate. It shows the yearly cost of borrowing, including interest and most compulsory fees. In the UK, adverts for credit often show a representative APR, which at least 51% of successful applicants must be offered, so your own rate may be higher.
How to use them
- Comparing savings: the higher the AER, the more you earn.
- Comparing loans or credit cards: the lower the APR, the cheaper it is.
- Always compare like with like, over the same term.
Where SendPay fits
SendPay does not offer savings interest, loans or credit cards. It is software for launching your own branded money app with accounts, cards, transfers and payment links, powered by licensed partners.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.