Average Daily Balance

Posted by Professor Cram in Consumer Credit and Banking

Average Daily Balance

The Average Daily Balance is the total of the balance at the end of each day during a period divided by the number of days in the period.

Average Daily Balance, or ADB, is often used to calculate periodic interest charges by multiplying the periodic interest rate by the average daily balance. The most common period used for this type of calculation is monthly, which can either be a rolling 30 day period, or an actual calendar month. The most common use of Average Daily Balance for typical consumers is credit cards that calculate monthly finance charges based on the average daily balance, although some only do this if the balance from the prior month is not paid in full by the due date.

Example of Average Daily Balance

The method for finding the Average Daily Balance is illustrated in the chart below. In this example, let's assume the following:

  • Starting balance on Jan 1: $1,987.65
  • Period length: 7 days
  • Purchases:
    • Jan 2: $256.78
    • Jan 5: $ 78.99
    • Jan 7: $ 22.21
  • Payments:
    • Jan 4: $497.15
    • Jan 7: $800.00

Starting with the starting balance, add the purchases and subtract the payments for each day to find that day's balance. Be sure to include all the days in the period, even those with no transaction activity. Add these daily balances (in this case, seven of them) and divide by the number of days in the period (in this case, seven) to find the Average Daily Balance.





Jan 01     $ 1,987.65
Jan 02 $256.78   $ 2,244.43
Jan 03     $ 2,244.43
Jan 04   $497.15 $ 1,747.28
Jan 05 $ 78.99   $ 1,826.27
Jan 06     $ 1,826.27
Jan 07 $ 22.21 $800.00 $ 1,048.48
    Total of Daily Balances: $12,924.81
    Number of Days: 7
    Average Daily Balance: $1,846.40

As you can see, making payments earlier can reduce your overall Average Daily Balance. This, in turn, will reduce your interest payments.



6 Responses to “Average Daily Balance”

  1. financial says:

    With havin so much content do you ever run into any problems of plagorism or copyright infringement?
    My site has a lot of completely unique content I’ve either
    created myself or outsourced but it appears a lot of it is popping it up all
    over the web without my permission. Do you know any methods to help reduce content from being stolen?
    I’d really appreciate it.

  2. hardware apple says:

    This excellent website certainly has all the info I wanted about this subject and didn’t know who to

    Feel free to surf to my web-site hardware apple

  3. kenza farah karismatik telecharger says:

    It is not my first time to pay a quick visit this website, i am browsing this web page dailly and obtain nice information from
    here everyday.

  4. Tashia Baldassano says:

    Hey there, I think your website might be having browser compatibility issues. When I look at your website in Firefox, it looks fine but when opening in Internet Explorer, it has some overlapping. I just wanted to give you a quick heads up! Other then that, amazing blog!

  5. Hershel Rack says:

    its superb as your other content : D, regards for putting up.

  6. Tracee Fleisner says:

    I precisely desired to appreciate you all over again. I’m not certain the things that I could possibly have undertaken in the absence of the type of techniques revealed by you relating to such a subject. It seemed to be the difficult scenario in my position, nevertheless finding out this expert approach you handled that took me to cry over fulfillment. I am just happy for your work and believe you are aware of a powerful job that you are undertaking teaching many people through the use of your webblog. I am sure you haven’t got to know all of us.

Leave a Reply

Get More Help!

Click one of these links to get more help from another Cramlet in this same chapter: