For all Checking, Money Market (Checking and Savings), the Average Daily Balance is calculated by adding the Ledger Balance in the account for each day of the statement period and dividing that figure by the total number of days in the statement period. For all of Savings accounts, Average Daily Balance is calculated by adding the Ledger Balance in the account for each day of the month and dividing that figure by the total number of days in the month.
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This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day’s balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card’s monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance it would yield a monthly finance charge of $7.50. See two-cycle billing.
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The average amount in a deposit account that equals the sum of the daily balances during an accounting period, usually a month, divided by the number of days in the period. Can sometimes be used to avoid service charges or to qualify for special services. See also, minimum daily balance.
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