An annual percentage rate (APR) is the annual rate charged for borrowing or earned through an investment.

APR does not take into account compounding. You often see APR numbers when comparing credit cards or mortgage rates. The APR, by law, must be shown to customers by credit card companies and loan issuers to facilitate a clear understanding of the actual rates applicable to their agreements.

Credit card companies are allowed to advertise interest rates on a monthly basis, but they are also required to clearly state the APR to customers before any agreement is signed.