# Is 360 or 365 used to calculate deposit interest



## Hen (8 Aug 2013)

In the best buys post what assumption is being made with regards the day basis being used 360 or 365 or does this matter?

The reason I ask is that I have a special deposit account whose rate was calculated on a 365 basis but the bank was taken over and the rate has changed because the 360 basis is being used. 

I want to compare the account with others out there but don't know which rate I should be comparing the 365 or 360 one?


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## callybags (9 Aug 2013)

I can't understand how any bank could use 360 days, seeing as there are 365 (and a quarter) days in a year.

Is it an annual rate you are working off- i.e. is the rate quoted as APR?


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## Hen (9 Aug 2013)

See [broken link removed] 
who state in their Important Information section "Gross interest rate quoted is calculated on a 360 day basis."

I'm told that it is AER.


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## Number14 (9 Aug 2013)

The 360/365 calculation should not matter unless the rate is the same for each (in which case 360 would be better)

For example, €10k deposited for 1 year at 2% on a 365 basis is calculated as follows:
10,000*2% = €200 (before DIRT). €200/365 = €0.547 per day

To get the equivalent 360 day rate, divide the interest rate (2%) by 365 and multiply out by 360 - so (2% / 365) * 360 = 1.97%

So one account on a 360 day interest basis at 1.97% will earn the same interest as 2% on a 365 day basis.

10,000*1.97% = €197 (before DIRT). €197/360 = €0.547 per day


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## Hen (9 Aug 2013)

Exactly what I though so when you are comparing rates you will have to also compare if they are using a 360 or a 365 day interest basis. Do all banks quote what day basis they use?


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## newirishman (9 Aug 2013)

Hen said:


> Exactly what I though so when you are comparing rates you will have to also compare if they are using a 360 or a 365 day interest basis. Do all banks quote what day basis they use?



That's what the "AER" figure is for. AER = Annual Equivalent Rate.
An example might be where the bank says you get 2% but they actually using 360 days for interest calculation which would result in an AER of 1.97% or so.

Hence it is always important to use the AER if you are comparing different products or rates, or eg monthly vs annual interest payments.


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