Average Daily Balance

An average daily balance is a calculation that involves taking the balance at the beginning of each day and adding any new transactions, such as deposits or withdrawals. This information is then divided by the total number of days in the billing cycle to determine the average daily balance. This calculation provides financial institutions with an accurate measure of how much money customers owe on their accounts over a given period of time. It also allows them to determine what interest rate should be applied for that particular period.