How To Calculate Your Average Daily Balance (ADB)
To calculate average daily balance (ADB) on your credit card is an important part of calculating your credit card interest rate. Your average daily balance is the average amount you carry on your credit card each day during the billing cycle. This can be calculated manually or automatically by your credit card company. Either way, calculating it yourself is easy, and it will help you predict how much your credit card bill will be at the end of the month before your bill arrives.
What is an average daily balance?
An ADB is calculated using the amount listed on your credit card statement divided by the number of billing cycles in the current billing period. An example, if your balance is $10,000 but the billing cycle for the current month is 1, your ADB is $10,000 divided by 12. A monthly average balance is also calculated by dividing the amount by 12. Get your free credit score Below are two methods for calculating your ADB, manual and automatic: 1. Manual: Enter the amount on your credit card in the corresponding boxes.
How do I calculate an average daily balance?
The easiest way to calculate this value is to divide the number of months in the billing period by 30, and then multiply by 3. When the number is divided by 3, it is divided by 365. In other words, if your amount is $10,000, and you have 30 months in the billing period, your ADB will be $95.46. What is the difference between a median daily balance and your credit card balance? The difference between your ADB and your credit card amount due is the dollar amount that you pay in interest each year for carrying a balance on your credit card. If you have a balance of $10,000 and your calculated balance is $95.46, your interest rate is 5.9%. To calculate your interest rate, divide your balance by your ADB.
Here’s an Example
- Ending amount for Day 1: $1000.00
- Ending amount for Day 15: $2000.00 (because you bought some things worth $1000 on this day)
- Ending amount for Day 20: $1500.00 (because you paid off $500 on this day)
The above example would really look like this:
| Day | Balance |
|---|---|
| 1 | $1000.00 |
| 2 | $1000.00 |
| 3 | $1000.00 |
| 4 | $1000.00 |
| 5 | $1000.00 |
| 6 | $1000.00 |
| 7 | $1000.00 |
| 8 | $1000.00 |
| 9 | $1000.00 |
| 10 | $1000.00 |
| 11 | $1000.00 |
| 12 | $1000.00 |
| 13 | $1000.00 |
| 14 | $1000.00 |
| 15 | $2000.00 |
| 16 | $2000.00 |
| 17 | $2000.00 |
| 18 | $2000.00 |
| 19 | $2000.00 |
| 20 | $1500.00 |
| 21 | $1500.00 |
| 22 | $1500.00 |
| 23 | $1500.00 |
| 24 | $1500.00 |
| 25 | $1500.00 |
| 26 | $1500.00 |
| 27 | $1500.00 |
| 28 | $1500.00 |
| 29 | $1500.00 |
| 30 | $1500.00 |
| Total | $40,500.00 |
Now divide the total ($40,500.00) by the total number of days (30) and you get an ADB of $1,350.00 which is what your credit card company will calculate your credit card interest against.
To make your life easier, I have created an average daily balance calculator.
Calculating an average daily balance automatically
You can usually check your credit card company’s online calculator to calculate your ADB on a credit card. It will show you the total amount you owe, the date you made your last payment, and your ADB. Calculating your daily balance manually To calculate your median daily balance manually, calculate the number of transactions you made on your credit card in the previous billing cycle. Also, subtract the amount you paid off from the total amount you owe, so that you know your ADB. Example: “I made 10 transactions in the previous billing period. The calculated value was $350.
Conclusion
Most people forget to calculate their credit card bills, and the first bill that arrives is always a shock to the system. Using credit card bill calculation tools and calculators will help you understand your credit card bill in detail and plan accordingly. Take these ideas with you to the next time you receive your bill, or you will be caught by surprise.