In short: A day-count convention decides how many days of interest fall between two dates and how long a year is. The same $1,000,000 at 6% from 1 January 2026 to 1 January 2027 earns $60,000.00 under 30/360 and $60,833.33 under ACT/360. Nothing about the loan changed except the rule for counting.
Why counting days is not obvious
Interest for a period is principal times rate times a fraction of a year. The first two are written in the contract. The fraction is where the argument is, because a year does not divide evenly: months run 28 to 31 days and one year in four has an extra day.
A day-count convention is a rule that settles two questions. How many days are there between the start and end dates? And how many days are in the year those are measured against? It is written as numerator over denominator, so "ACT/360" means actual days elapsed, divided by a 360-day year.
These are market conventions, set by the contract or by the rules of the market a security trades in. They are not set by tax law and they do not change from year to year.
The four conventions this site implements
30/360. Every month is treated as 30 days and the year as 360. January 15 to April 15 is exactly 90 days and exactly a quarter of a year, whatever the calendar says. This is why a fixed-rate mortgage can charge one twelfth of the annual rate every month: twelve equal 30-day months make a 360-day year.
ACT/360. Count the real days, divide by 360. Because a real year has 365 or 366 days, a full year earns more than the stated rate. This is the convention of money markets and many commercial loans.
ACT/365 Fixed. Count the real days, divide by 365 always, including in a leap year.
ACT/ACT. Count the real days, divide by the real length of the year: 365, or 366 in a leap year. Where a period spans both, each part is measured against its own year.
The same loan under each rule
All figures are interest on $1,000,000 at 6%, computed by the same engine that runs the calculators here.
| Period | 30/360 | ACT/360 | ACT/365 | ACT/ACT |
|---|---|---|---|---|
| 15 Jan to 15 Apr 2026 | $15,000.00 | $15,000.00 | $14,794.52 | $14,794.52 |
| 28 Feb to 31 Mar 2026 | $5,000.00 | $5,166.67 | $5,095.89 | $5,095.89 |
| 1 Jan 2026 to 1 Jan 2027 | $60,000.00 | $60,833.33 | $60,000.00 | $60,000.00 |
| 1 Jan 2024 to 1 Jan 2025 (leap) | $60,000.00 | $61,000.00 | $60,164.38 | $60,000.00 |
Three things in that table are worth noticing.
First, 30/360 and ACT/360 agree on the first row and disagree on the second. January 15 to April 15, 2026 happens to be exactly 90 real days, so both count 90. February 28 to March 31 is 31 real days, but 30/360 calls it 30.
Second, ACT/360 always charges more than the quoted rate over a full year. On a 6% loan, 365 days over 360 is an effective 6.0833%. The $833.33 is not a fee and appears nowhere on the rate sheet. It comes entirely from the denominator.
Third, the leap year separates ACT/365 from ACT/ACT. Across 2024, ACT/365 counts 366 days against a 365-day year and pays $164.38 extra. ACT/ACT counts 366 against 366 and pays exactly the stated rate.
The end-of-month adjustments in 30/360
30/360 needs rules for dates that do not fit a 30-day month, and this is where implementations differ. The version used here is the US convention:
- If the start date is the 31st, or the last day of February, it is treated as the 30th.
- If the end date is the 31st and the start date is the 30th or later, the end date is treated as the 30th.
- If both dates are the last day of February, the end date is treated as the 30th.
So January 31 to February 28, 2026 counts as 28 days, not 30: the start becomes the 30th, the end stays the 28th, and one month minus two days is 28. A different 30/360 variant, used in European markets, adjusts the end date differently and can give a different answer on the same dates. If two systems disagree by a day at a month end, this is almost always why.
Which convention applies where
US Treasury notes and bonds accrue on an actual/actual basis, set out in the Treasury's own regulations. Municipal securities use a 30-day month and 360-day year under the Municipal Securities Rulemaking Board's calculation rule. Money-market instruments and many floating-rate commercial loans use ACT/360. A typical fixed-rate residential mortgage accrues a twelfth of the annual rate each month, which is the 30/360 result.
For a consumer loan, the practical point is that the convention is a term of the contract. If a commercial or construction loan quotes ACT/360, the cost over a year is about 1.4% higher than the same rate on 30/360, and it is worth pricing in.
Where to see this in practice
The loan calculator and mortgage calculator accrue monthly at one twelfth of the annual rate. The simple interest calculator shows the principal times rate times time relationship directly, and the bond yield calculator applies accrual to a traded security. The implementation is described on the methodology page.
Sources
- U.S. Department of the Treasury, 31 CFR Part 356, Appendix B, formulas for calculations relating to Treasury securities, including the actual/actual accrual basis. ecfr.gov/current/title-31/subtitle-B/chapter-II/subchapter-A/part-356
- Municipal Securities Rulemaking Board, Rule G-33, calculations for municipal securities, specifying the 30-day month and 360-day year. msrb.org/Rules-and-Interpretations/MSRB-Rules/General/Rule-G-33