1. What is Average Daily Balance?

The Average Daily Balance (ADB) is a method used by banks to calculate interest charges or fees on an account. It represents the sum of daily balances divided by the number of days in the period.

2. How Does the Calculator Work?

The calculator uses the ADB formula:

Where:

• \(\sum(\text{daily balances})\) — Sum of all daily account balances
• \(\text{days}\) — Number of days in the calculation period

Explanation: The formula calculates the average balance maintained in an account over a specific period, which is commonly used for interest calculation and fee assessment.

3. Importance of ADB Calculation

Details: Accurate ADB calculation is crucial for determining interest earnings on savings accounts, interest charges on credit cards, and avoiding maintenance fees on checking accounts.

4. Using the Calculator

Tips: Enter daily balances as comma-separated values in dollars, and the number of days in the period. All values must be valid (positive numbers, days > 0).

5. Frequently Asked Questions (FAQ)

Q1: How do banks use ADB?
A: Banks use ADB to calculate monthly interest on savings accounts, determine credit card interest charges, and assess minimum balance requirements.

Q2: What's the difference between ADB and daily balance?
A: Daily balance is the amount in the account each day, while ADB is the average of these daily balances over a period.

Q3: How often should I calculate my ADB?
A: Monthly calculation is typical since most banks use monthly cycles for interest and fee calculations.

Q4: Does ADB include weekends and holidays?
A: Yes, ADB includes all days in the calculation period, including weekends and holidays.

Q5: Can ADB help avoid bank fees?
A: Yes, maintaining a sufficient ADB can help avoid monthly maintenance fees on many checking accounts.