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 daily balances divided by the number of days in the billing cycle.

2. How Does the Calculator Work?

The calculator uses the ADB formula:

Where:

• \( \Sigma(\text{Daily Balances}) \) — Sum of all daily balances during the billing cycle
• \( \text{Days} \) — Number of days in the billing cycle
• \( ADB \) — Average Daily Balance

Explanation: This calculation helps determine the average amount owed each day during the billing cycle, which is used to calculate interest charges.

3. Importance of ADB Calculation

Details: Understanding your ADB helps you estimate interest charges and make informed decisions about credit card payments and debt consolidation strategies.

4. Using the Calculator

Tips: Enter the sum of all daily balances in dollars and the number of days in the billing cycle (typically 28-31 days). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is ADB different from ending balance?
A: ADB considers your balance each day of the billing cycle, while ending balance only looks at the balance on the last day.

Q2: Why is ADB important for credit cards?
A: Most credit card companies use ADB to calculate interest charges, so a lower ADB means less interest.

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

Q4: Does ADB apply to all credit cards?
A: Most cards use ADB, but some may use other methods like adjusted balance or previous balance - check your card terms.

Q5: How does ADB affect debt consolidation?
A: Understanding ADB helps compare interest costs between cards and evaluate consolidation options.