APR definition: “An annual percentage rate (APR) is the yearly rate charged for a loan or earned by an investment and includes interest and fees”
https://www.investopedia.com/terms/a/apr.asp
APY definition: “APY is the actual rate of return that will be earned in one year if the interest is compounded”
https://www.investopedia.com/terms/a/apy.asp
As the definition suggests, the APR represents the annual rate charged or earned by an investment. This can be misleading because it’s based on simple interest, meaning it does not factor in compounding.
To illustrate, a credit card with a stated APR of 18% (annual) charges 1.5% of the balance on a monthly basis.
$$ 18 percent /12 months = 1.5 percent $$
Thus, a $1000 balance will generate $15 in interest in month 1. When the interest from month 1 is capitalized (being added to the balance)