# How to deal with February in accrued interest calculation (30/360 day count convention)

How would you deal with the month of February in a daily interest calculation on a loan that compounds monthly?

I would think that with 30/360 day count convention, each day in February results in accruing "more daily interest" than usual because you are spreading a month's worth of interest across 28 days instead of 30.

For example, say you borrowed \$100 on 2/1/2017 and it carries a 12% interest, compounded monthly. This effectively should mean you accrue \$1 worth of interest at end of February, resulting in end balance of \$101, and then 1% again on that \$101 at the end of March, for end balance at 3/31/2017 of \$102.01. Below is a sample calculation.

Notice that the daily interest in February is higher than the daily interest beginning 3/1. Is this the correct way to accrue interest in February? I understand in months like March, you don't accrue on the 31st, but want to figure out properly how to calculate the end balances on certain dates.

February accrual sample

• If the loan agreement calls for monthly compounding at an APR x% based on a 30/360 convention, then all you need to do is accrue (x/12)% interest a the end of each month, and not accrue interest on a daily basis. Most people (in the US) are cash basis taxpayers and not accrual-basis tax payers, and so your question is not relevant to them. If you are asking about managing a company's accounts on an accrual basis, then your question is off-topic on money.SE Commented Apr 4, 2017 at 22:37
• 12th root of X, actually. Commented Mar 13, 2023 at 23:11