Why can credit-card daily rates use either 365 or 360?
The annual day-count basis comes from the agreement. It should not be chosen casually from the calendar, because the same annual percentage can produce different daily charges.
Credit card payoff calculator →Separate the denominator from compounding
Dividing an annual rate by 365 or 360 produces different daily rates. Whether interest is added to the balance each day is a further question that determines compounding. Average daily balances, transaction dates and grace periods can also affect a real statement. A daily-rate label alone does not establish every step of the issuer’s calculation.
Compare the same balance and duration
Keep a 1,000 balance unchanged for thirty days at an annual rate of 18%. Simple daily interest using a 365 basis is 1,000 × 0.18/365 × 30, approximately 14.79. Using a 360 basis gives 15. Neither calculation automatically represents daily compounding; that would require applying a growth factor to the balance for each day instead of simply multiplying by thirty.
Select the contractual convention
The tool offers a monthly approximation, an effective annual-rate mode, actual-day 365 and 360 modes, and daily compounding. Match the agreement or statement rather than choosing whichever option gives the lowest cost. Accounts containing several rate categories may require separate analysis. The example excludes grace periods, fees, purchases and payments posted partway through the period, so it is a controlled comparison rather than a complete credit-card billing simulation.
Try the calculators
- Credit card payoff calculator
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- Simple interest
Calculate interest without compounding.
- Date difference
Count calendar days between two dates.