1. What is Average Daily Balance?

The Average Daily Balance (ADB) is a method used by credit card companies to calculate interest charges. It represents the sum of each day's balance divided by the number of days in the billing cycle.

2. How Does the Calculator Work?

The calculator uses the ADB formula:

Where:

• \( \sum(Daily\ Balances) \) — Sum of all daily balances in the billing cycle
• \( Days \) — Number of days in the billing cycle

Explanation: The equation calculates the mean balance across all days in the billing period, which credit card companies use to determine interest charges.

3. Importance of ADB Calculation

Details: Understanding your ADB helps you estimate interest charges and manage credit card debt more effectively. Lower ADB means less interest paid.

4. Using the Calculator

Tips: Enter the sum of all daily balances (can be found on your credit card statement) and the number of days in your billing cycle (typically 28-31 days).

5. Frequently Asked Questions (FAQ)

Q1: How do credit card companies use ADB?
A: They multiply ADB by the daily periodic rate (APR/365) and number of days in billing cycle to calculate interest.

Q2: What's the difference between ADB and daily balance methods?
A: ADB smooths out variations by averaging, while daily balance method charges interest on each day's balance separately.

Q3: How can I reduce my ADB?
A: Make payments earlier in the billing cycle, maintain lower balances, or make multiple payments throughout the month.

Q4: Does ADB include new purchases?
A: Yes, ADB includes all balances - purchases, cash advances, fees, and any carried-over balances.

Q5: Is ADB the same as statement balance?
A: No, statement balance is the amount due at the end of the cycle, while ADB is the average of all daily balances.