APY is designed to reflect the effect of compounding over a year, assuming the underlying conditions remain in place. A nominal interest rate may not include that compounding effect.
Why the difference matters
Two products can display similar percentages while calculating and crediting interest differently. Comparing only the largest printed number can create a false sense of equivalence.
What to verify
Find the compounding frequency, crediting frequency, balance tier, fee schedule, and whether the rate is variable. Then compare like with like.