June 4, 2025
91: APR, APY, WTF? The Jargon That’s Keeping You Broke
Financial jargon isn’t just annoying—it’s expensive . Banks bank on the fact that most people don’t really know what terms like APR, APY, and amortization actually mean. That confusion? It could be costing you thousands.
This episode breaks down the alphabet soup of money terms that keep smart, successful people stuck.
No jargon. No fluff. Just the knowledge banks hope you never Google.
Visit prenups.com/sugardaddy to learn more about fair prenups that help couples plan for a healthy financial relationship.
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Notes from the show:
Chapters
00:00 - Financial Jargon Demystified
08:55 - Understanding APR vs APY
15:22 - The Truth About High-Yield Savings
19:36 - Principal, Interest & Amortization Explained
25:55 - Fixed vs Variable Rates
29:30 - Key Takeaways & Action Steps
Transcript
WEBVTT
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This episode is sponsored by Prenupscom.
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That's what Brandon and I did after eight years of marriage.
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If financial jargon like APR, apy or amortization make you think WTF and make your eyes glaze over, then you are not alone.
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This episode is for you.
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We are here to end the confusion that is costing you money.
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In this episode, we are going to break down the fancy finance lingo that banks are using to keep you in the dark.
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We'll teach you what these terms really mean, how to spot red flags in credit card and loan offers, and how to finally understand your savings account and what it's actually doing.
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No fluff, no judgment, just real talk that will help you make smarter money moves.
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If this is of interest, stay tuned.
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Hey babe, what are we talking about today?
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We're talking about the world of finance and all of the crazy acronyms, the jargon, the lingo, that oh why HSA, ppo, hysa, apr, ayp I don't know, I mean just like WTF.
00:02:09.039 --> 00:02:12.188
So, more specifically for today's episode, though, we are going to focus on APR versus APY, apy all right, please, please, tell us.
00:02:12.188 --> 00:02:12.631
Where are we starting?
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So, first and foremost, like what do these acronyms actually stand for?
00:02:14.556 --> 00:02:24.856
Please tell me so apr is annual percentage rate and apy is annual percentage yieldR is what you see on your credit cards.
00:02:24.856 --> 00:02:31.550
Yes, so the main difference between the two is that an APR is what you are going to be charged to borrow.
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So you think about on your credit cards.
00:02:34.465 --> 00:02:37.516
On loans, this is what you're going to see the APR.
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This is the amount that you're being charged to borrow that money, as compared to with APY, annual percentage yield.
00:02:43.812 --> 00:02:47.002
This is what you're going to see on savings accounts, cds.
00:02:47.002 --> 00:02:50.711
So this is going to be what you earn the money I'm making.
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Yes, not the money they're taking, correct?
00:02:53.483 --> 00:02:58.092
that is the main difference between the two okay, so apy is the better one.
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Apr we want to stay away from and they.
00:03:02.531 --> 00:03:16.901
I mean, you know, the sad part is is that unfortunately, too many people make financial decisions where you need to be taking this, these two, into account and they don't really understand what they are and they're kind of just you know, you know, oh, I'm going to go off.
00:03:16.901 --> 00:03:18.566
What is the easiest one to do, I'm going to go.
00:03:18.566 --> 00:03:20.431
Which one's going to provide me with rewards?
00:03:20.431 --> 00:03:32.343
You know what is a brand name that I'm familiar with?
00:03:32.343 --> 00:03:40.210
And they really don't read the fine print and there might be hidden fees, poor returns, higher rates than you necessarily need if you were to go with a alternative option and unfortunately you're missing out and you know, potentially costing you money when you're not understanding these different terms.
00:03:40.840 --> 00:03:51.661
Yeah, it's the little terms and the little acronyms that could be costing you big bucks in the end and, to be honest, as someone who works in the financial services industry, they don't make it easy for you.
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No, they don't make it easy because, in all honesty, the word yield throws a lot of people off like what does that really mean?
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Right right because, like you hear, interest rate and you know that's bad you know that interest rate could be good.
00:04:05.270 --> 00:04:06.682
Oh well, if you're earning it.
00:04:06.723 --> 00:04:18.048
Yeah, okay, yeah true because they throw you off on purpose, because most people think about, for example, like with a savings account you know the interest rate on the savings on a high yield savings account, but they don't also associate that that.
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That's what the apy is the annual annual percentage yield correct.
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Okay, ok, so like I said they unfortunately they overcomplicate it when I think it could be explained in much simpler terms.
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So if you're out there thinking like hey, like I just listening to the few first few minutes of this podcast, you're like, oh, I didn't understand that You're not alone.
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Right.
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Like they're not making it easy for you.
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Well, and I mean the APRs on credit cards right now are sky high.
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I mean some of them are pushing 30%.
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That's crazy.
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And that's the biggest thing, when we say that you have to understand this and break it down and really make your decisions on which option you're going to select in certain scenarios, based off of these numbers.
00:05:05.680 --> 00:05:06.759
You have to run the numbers.
00:05:07.000 --> 00:05:09.892
You have to run the numbers, especially when it comes to the APR.
00:05:09.892 --> 00:05:12.601
This is what you're going to be charged to borrow.
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You have to understand what the interest rate is on that.
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In addition to, are there any type of additional fees?
00:05:19.767 --> 00:05:22.418
So let's just use credit cards as an example.
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You might, like I said, with interest rates the way they are now, you might have somewhere almost close to an APR interest rate of 30% on a credit card.
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I mean above 20% is pretty common.
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Oh, definitely above 20% yeah.
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But then also, once again, it depends on your credit score as well.
00:05:38.589 --> 00:05:41.187
But then you also take into account any additional fees.
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So is there an annual fee to even just have that credit card?
00:05:43.447 --> 00:05:44.149
Yep account any additional fees.
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So, is there an annual fee to even just have that credit card?
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Yep, because that's an additional fee that you have to factor in.
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And then also, if you're potentially late on any of your payments, is there an additional late fee?
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So, understanding one what the APR is in regards to how much you're being charged to borrow, what is an annual fee that's associated with that, if there is one, and then any other potentially hidden fees, such as late fees.
00:06:04.874 --> 00:06:05.093
Yeah.
00:06:05.521 --> 00:06:06.665
All those need to be taken into account.
00:06:07.100 --> 00:06:09.209
Well, so two things, obviously.
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With the credit card.
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Let's say you're not paying your credit card balance in full and you have a, let's say, 22% interest rate and your balance was $120.
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You paid $80.
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Now you have a $40 balance.
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That $40 balance is still going to incur that same 22% interest rate, right?
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Well, not at that one time.
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So the APR is the interest rate over the course of the entire year.
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All right, real quick.
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I want to speak to the person listening who feels like they can't work with a financial planner yet because they're carrying a lot of debt.
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First of all, I see you and I need you to know you're not broken, you're not behind.
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You're just in a tough season.
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I created something just for you because I've had people reach out who are serious about changing their money story.
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But the full financial planning package just wasn't the right fit yet.
00:07:02.064 --> 00:07:07.221
So I built a new service through Oak City Financial that's focused completely on debt reduction.
00:07:07.221 --> 00:07:08.675
No fluff, no shame.
00:07:08.675 --> 00:07:15.701
You'll get a one-time planning session, a personalized payoff strategy, your own financial dashboard and monthly coaching.
00:07:15.701 --> 00:07:21.016
If you want extra support while you climb out, it's $300 to get started and $100 a month.
00:07:21.016 --> 00:07:23.422
If you want that ongoing guidance, that's it.
00:07:23.422 --> 00:07:27.380
This is about helping you get unstuck, not making you feel like you failed.
00:07:27.380 --> 00:07:31.019
If this sounds like what you've been needing, go ahead and schedule a call with me.
00:07:31.019 --> 00:07:32.454
The link is in the show notes.
00:07:32.454 --> 00:07:34.019
Let's take the first step together.
00:07:34.019 --> 00:07:35.252
Let's take the first step together.
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I think the one thing to note that's really important is that it doesn't matter what your APR is if you're paying your credit card off in full every month.
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Correct you only I mean, I know that's pretty basic, but like it only matters if you're not paying it off, if you're carrying a balance, that's when it matters If you are paying it off in full every month then it doesn't matter if you're paying a 60% APR?
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Hopefully not, but you know, because you're literally not paying it at that point.
00:08:10.521 --> 00:08:16.139
So the goal is especially with the credit cards, especially the credit cards that have fees attached.
00:08:16.139 --> 00:08:30.649
Like we've said this before, but we usually most years we pay close to $1,200 in credit card fees, the annual rate that we pay to hold the credit card because of various perks.
00:08:30.649 --> 00:08:40.260
That has nothing to do with the APR, but the APR only matters when you're carrying a balance, because then that's when you have that penalty of quote unquote borrowing the money.
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Correct, correct.
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Yeah.
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Ok, let's go to APY, because I think most people have at least seen APR, have some inkling of what it means.
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But annual percentage yield.
00:08:52.095 --> 00:08:54.802
So that's a good one, because we're getting money back.
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Yeah, this is like I said before.
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These are the ones you're going to see associated with a savings account, a CD, and this is going to be the interest that you earn on your money.
00:09:05.076 --> 00:09:06.759
So this is the positive one.
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Yes, that's the one where our money is making money.
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We'd love to see it.
00:09:10.434 --> 00:09:14.192
If you don't have a high yield savings account yet, what are you doing?
00:09:14.192 --> 00:09:16.076
We talk about it on every episode.
00:09:16.076 --> 00:09:17.541
Use the link in our show notes.
00:09:17.541 --> 00:09:24.998
We have one for Ally and we have a high yield account that we really like.
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With Wealthfront as well.
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Your money that is sitting in your emergency savings, put it in a high yield savings.
00:09:28.509 --> 00:09:50.524
And the funny thing is is that this is the one that is a reoccurring thing that I see for individuals when I start to work with them, or just even, you know, talking to people, is that they're still using these traditional brick and mortar banks where they're getting 0.02, 0.03% interest rate on their savings account and I'm like why?
00:09:51.205 --> 00:09:57.191
Like you could literally be making thousands of dollars a year just by parking your money into a high yield savings.
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And the funny thing is that sometimes these are the same people who are like oh you know, can you help me beat the market?
00:10:03.495 --> 00:10:12.551
I'm like I can't help you beat the market, but I can definitely give you two seconds of advice that is going to give you over a thousand cent return on your savings.
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They're like should I be investing in crypto?
00:10:16.479 --> 00:10:18.903
And you're like shut up and open an HYSA.
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The amount of, like I said, the amount of people that still have savings accounts, traditional savings accounts, where they're getting 0.02%, is astonishing to me, because you can easily go online and it takes not even five minutes to do.
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Yeah, and just as a call out, if your money is parked at the Bank of America's, the Wells Fargo's, any of those traditional brick and mortars, or even at your local credit union, and it is not named as a high yield savings account, you are making no money.
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So don't assume that your money is sitting in a high yield savings account if you didn't actually put it in a high yield savings account.
00:11:00.153 --> 00:11:02.500
So here's a task for people listening.
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If you don't know what your current APY annual percentage yield is on your savings account that you have right now whether it's a high yield savings account or just a regular savings account go look it up.
00:11:14.910 --> 00:11:15.815
Go find out what it is.
00:11:16.450 --> 00:11:17.818
We know what ours is, but you need to go look it up.
00:11:17.818 --> 00:11:18.282
Go find out what it is.
00:11:18.282 --> 00:11:19.549
We know what ours is, but you need to go look it up.
00:11:20.110 --> 00:11:35.115
Yeah, I mean we're making 4.5% on the money sitting in our savings that we hope to not touch and it just kind of keeps growing and we're making money for it sitting there Most basic thing that you can do for yourself this month.
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And I also do want to point out.
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So, for example, with like a savings account, a high yield savings account or regular savings account, more specifically, your APY can change.
00:11:43.576 --> 00:11:43.836
Yes.
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All right.
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Now, with the CD you're locked into a certain APY for a certain period of time.
00:11:49.975 --> 00:12:00.561
So for example, say maybe a one year, 12 month CD, you're going to have that same APY for the entire 12 months, but then, once that 12 months ends, then your APY can change.
00:12:00.561 --> 00:12:10.176
So I do want to also, like I said, keep that in mind that you have to constantly not constantly but periodically keep up with this information and see if there's any changes to the APY on these different accounts.
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Be aware.
00:12:11.078 --> 00:12:29.043
Yeah Well, and two, even if, going back to APR, maybe you had a promotional offer for six months, eight months, nine months a year, whatever with a credit card, put that in your calendar Because as soon as that promotional rate is over, it's probably going to jump back up to that crazy high percentage.
00:12:29.043 --> 00:12:33.802
So you need to be aware of that, especially if you're signing up for promotional offers of some sort.
00:12:34.350 --> 00:12:36.599
Yes, everything is in the details.
00:12:36.599 --> 00:12:49.298
Yes, the fine teeny, fine, teeny, tiny, teeny, tiny print you will have different institutions that show like a low apr and a high apy and once you read the fine print it really reveals what the truth is behind it.
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So, like you know, like you said, like you might see a high apy, but then you read the fine print it's like, oh, that's just for like the first two or three months yeah and then it just drops down to the regular, which is fine.
00:12:59.767 --> 00:13:13.634
You get a little bit more, but you do want to make sure that, over the course of an extended period of time, that, when it comes to your I keep using the high yield savings account with APY that it's on par for the, you know, with the broader market.
00:13:13.634 --> 00:13:23.946
So, for example, like if a majority of high yield savings accounts are doing 4.5% but you look at your savings account and it's only getting 2%, you're not on par.
00:13:23.946 --> 00:13:24.706
You need to change.
00:13:25.190 --> 00:13:29.715
You are not on par, okay, so I think we've got APR, we've got APY.
00:13:29.715 --> 00:13:32.256
What about the other terms?
00:13:32.770 --> 00:13:39.943
There are a few more little financial terms that I think you will encounter on a regular basis and you should have a basic understanding of what they are.
00:13:39.943 --> 00:13:42.357
I'm going to start out with simple the word principle.
00:13:43.149 --> 00:13:45.899
Not like principle from Saved by the Bell.
00:13:46.471 --> 00:13:47.436
No, even though it's spelled the same.
00:13:48.270 --> 00:13:50.318
Yeah, weird, right, yeah yeah.
00:13:50.318 --> 00:13:55.298
And then there's well the principle of the matter, so that one's different, okay, so what is the principle that?
00:13:55.337 --> 00:13:55.979
So that one's different.
00:13:55.979 --> 00:13:56.700
Okay, so what is the principal?
00:13:56.700 --> 00:13:59.825
That is, the base amount that you either borrow or invest.
00:14:01.110 --> 00:14:02.394
So, for example, your original amount of money?
00:14:02.576 --> 00:14:05.739
Yes, so let's just use from a state, from a borrowing standpoint.
00:14:05.739 --> 00:14:12.139
If you took out a loan for $10,000, your principal is the $10,000 that you borrowed.
00:14:12.931 --> 00:14:14.035
That's pretty straightforward.
00:14:14.770 --> 00:14:23.085
Or if you're investing in the market and you invest $10,000, the initial amount that you put in is that $10,000 and that's the principal, okay.
00:14:23.085 --> 00:14:29.658
So from a borrowing standpoint, when you pay more back to the institution that you borrowed the money from.
00:14:29.658 --> 00:14:34.046
So you borrowed $10,000 and say, over the course of your loan, you pay back 13.
00:14:34.046 --> 00:14:40.464
You pay back the principal of your 10, but that additional $3,000 came from interest and that's your APR for borrowing the money.
00:14:41.245 --> 00:14:42.589
The penalty for borrowing.
00:14:42.609 --> 00:14:47.159
I wouldn't call it a penalty, because it's the price of borrowing.
00:14:47.220 --> 00:14:47.802
It's not a penalty.
00:14:47.822 --> 00:14:49.052
It's the price of borrowing.
00:14:49.052 --> 00:14:58.360
And then, on the opposite spectrum, if you have invested $10,000 and now you have $13,000, 10,000 was your principal and 3,000 is the growth that you've had on the account.
00:14:58.761 --> 00:15:04.159
Right, okay, we've kind of already touched on this, but what is the interest rate?
00:15:04.909 --> 00:15:11.100
This is the flat percentage that you're charged or earn, depending on whether you're borrowing or investing.
00:15:11.100 --> 00:15:15.125
That doesn't include any types of fees or any type of compounding of that.
00:15:15.466 --> 00:15:17.589
Okay, I mean, that's pretty basic.
00:15:17.850 --> 00:15:31.299
Yeah, and that's the one that we're most, most people are familiar with, which is always, you know, like I said before, finance industry kind of tries to make it difficult by adding these additional terms on top of it, that kind of intertwine with just the word interest rate.
00:15:31.400 --> 00:15:37.710
Yeah, but I mean, I mean we have interest rates on credit cards, on our mortgages, on our car loans, on our student loans.
00:15:37.710 --> 00:15:41.059
Like, if you are borrowing money, there is an interest rate.
00:15:41.059 --> 00:15:53.298
I mean, even if it's zero percent for a certain amount of time, there is some sort of interest rate attached, because these institutions let's call it what it is they make money when you pay interest.
00:15:53.298 --> 00:16:00.534
The credit card companies do not exist because of the people who are paying their bills on time and in full every month.
00:16:00.534 --> 00:16:06.719
The credit card companies exist because of the people who are borrowing money, who are not paying their bill in full every month.
00:16:06.839 --> 00:16:07.642
That's the business model.
00:16:07.870 --> 00:16:08.631
That's the business.
00:16:08.631 --> 00:16:13.062
They are relying on people to not pay their bill in full and to be in debt.
00:16:13.429 --> 00:16:17.782
Yeah, if everyone paid their credit card off on time, there wouldn't be any credit cards.
00:16:17.990 --> 00:16:30.620
Yeah, so honestly, like, if you want to stick it to the man, then you need to pay your credit card off on time, so that way you're not paying them the interest and you're getting all the perks and the miles and whatever else bonuses that you originally signed up for.
00:16:30.620 --> 00:16:31.763
That's the ultimate goal.
00:16:31.763 --> 00:16:35.000
Yeah, yeah, okay, let's get into a tricky one.
00:16:35.000 --> 00:16:36.770
Okay, let's get into a tricky one.
00:16:36.770 --> 00:16:37.772
Amateurization.
00:16:38.452 --> 00:16:38.712
All right.
00:16:38.712 --> 00:16:45.219
So that is how loan payments are split between the principal and the interest that you have to pay over time.
00:16:46.019 --> 00:16:46.500
Okay, all right.
00:16:46.740 --> 00:17:06.064
So remember, we take a step back where we talked about with the word principal we talked about, that's the initial amount in a loan scenario that you borrowed, but then you also have interest on top of that that you have to pay back as well, and this is just how it's broken up over a split up over the time period that you had to pay off that loan.
00:17:06.084 --> 00:17:14.513
Okay, now, one thing that I think a lot of people don't realize when it comes to a lot of loans is that often in the beginning, a lot of you think that your payment is going towards principal and interest.
00:17:14.513 --> 00:17:19.943
Oh, where a lot of times in the beginning you're actually paying off a lot of interest first, which-.
00:17:20.250 --> 00:17:21.455
Look at your mortgage statement.
00:17:21.455 --> 00:17:24.961
If you have a mortgage, pull up that statement.
00:17:24.961 --> 00:17:30.421
Get your feelings hurt because that payment is not going towards the principal.
00:17:30.991 --> 00:17:34.555
And let me break this down for you so that you can maybe understand a little bit more from a mathematical standpoint.
00:17:34.555 --> 00:17:46.798
All right, if you are having more of your monthly payments going towards principal, that's going to reduce the overall interest that you pay on the loan, because the interest is assessed upon.
00:17:46.798 --> 00:17:48.122
What is the remaining balance?
00:17:49.050 --> 00:17:54.671
All right, so you want that first initial principal balance to go down as quickly as possible?
00:17:54.691 --> 00:17:57.961
Yeah, Because then that allows you to pay less in interest over time.
00:17:57.961 --> 00:18:09.102
However, the way that they often set it up is that they've already predetermined a certain amount of interest that you're going to have, and most of your payment is going towards the interest as compared to going towards paying down the principal.
00:18:09.301 --> 00:18:09.502
Yeah.
00:18:09.630 --> 00:18:12.740
So less money going towards the principal, so it's not going down as much.
00:18:12.740 --> 00:18:14.896
So therefore you're having to pay more interest.
00:18:15.317 --> 00:18:15.538
Yep.
00:18:15.538 --> 00:18:42.352
So therefore you're having to pay more interest Yep and we've talked about this on a previous episode, but might be and you're trying to put extra money towards the principal.
00:18:42.352 --> 00:18:51.538
Call that institution first and find out hey, I want to apply $200 extra to next month's bill to the principal.
00:18:51.538 --> 00:18:52.849
How do I do that?
00:18:52.849 --> 00:18:55.532
And some of them they make it complicated.
00:18:55.532 --> 00:19:00.828
They're like oh, you need to mail a check to this address and you can't do it online because then it'll automatically.
00:19:00.828 --> 00:19:03.375
You need to find out Again.
00:19:03.765 --> 00:19:08.522
Yeah, do not simply hop online and add an additional $200 to your monthly payment.
00:19:08.644 --> 00:19:10.426
It might not, because that might not go towards principal.
00:19:10.547 --> 00:19:10.807
Right.
00:19:10.807 --> 00:19:13.750
So that's a really important call out.
00:19:13.750 --> 00:19:19.638
You need to call those institutions and say I want this amount of money applied to the principal.
00:19:19.638 --> 00:19:20.921
How do I do that?
00:19:20.921 --> 00:19:26.789
And some of them might say, oh, you can do it online and it'll actually have like a principal payment button.
00:19:26.789 --> 00:19:36.154
But others will make it extra complicated and you need to follow those exact steps in order to get the principal balance down and for it not to go towards the interest Correct.
00:19:36.154 --> 00:19:41.094
Yeah, Okay, what about fixed versus variable rates?
00:19:41.094 --> 00:19:45.787
You see that kind of on credit card offers, loan offers as well.
00:19:46.768 --> 00:19:52.156
So the main difference between them is that fixed stays the same If you are in a fixed rate.
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There's no variation in it.
00:19:53.779 --> 00:20:01.498
It stays the same over the term of whatever that loan or CD or whatever it may be.
00:20:01.498 --> 00:20:04.068
The rate stays the same as compared to a variable.
00:20:04.068 --> 00:20:06.115
That rate can increase.
00:20:06.115 --> 00:20:13.797
Technically it can increase or decrease, but most of the time when it comes into talking about borrowing money, that rate can increase.
00:20:14.779 --> 00:20:17.413
Yeah, do they ever just decrease it because they're trying to be nice?
00:20:17.413 --> 00:20:19.592
Yeah, they normally have like a minimum that it has to be.
00:20:19.972 --> 00:20:23.838
Yeah, and normally the minimum is set at what they currently are, kind of at.
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