Average Daily Balance Calculator (2024)

The average daily balance method is one of several methods used by credit card companies to calculate interest when a cardholder carries a balance. Cardholders too can use the formula as a way to anticipate interest charges and strategize payments to save money. Unless you’re a total math whiz, you’ll probably want the help of our average daily balance calculator to make crunching the numbers a breeze.

What Is the Average Daily Balance?

An average daily balance represents the average amount owed by the borrower on any one day of a billing period during which a balance is carried. Daily balances include your charges or purchases as well as credits, refunds or payments when applicable. They also include other fees you might have incurred through the use of your card, such as a foreign transaction fee or late payment fee. Essentially, it’s a running look at everything you owe the company.

We don’t recommend carrying balances on credit cards nor applying for credit cards without grace periods. You should be able to avoid interest entirely by paying a credit card bill in full, on time. When you don’t, you’ll need to calculate your average daily balance as part of the math required to figure out how much interest you’ll owe.

How Does Credit Card Interest Work?

An APR, or annual percentage rate, is a big-picture way to indicate the amount of interest you’d owe for carrying a balance from one billing period into the next, without paying it off in full. Talking about interest on an annual basis is good for comparing different credit cards or other types of borrowing, but not compatible with easily understanding how much interest you’ll pay from period to period.

Credit card companies deal with interest much more frequently than once per year. Credit card interest may be calculated as often as daily with card interest charged monthly if you carry a balance.

When Is Credit Card Interest Calculated for the Average Daily Balance Method?

Although your card issuer will consider every day’s balance when calculating for the average daily balance method, the calculation is only done once per billing statement, if you carry a balance. At that time, the issuer will calculate your monthly interest and at it your billing statement.

What Is the Average Daily Balance Method?

The average daily balance method accounts for your credit card balance on each and every day of the current billing period—in other words, all your “daily balances.” To come up with a dollar amount for interest owed via the average daily balance method, your credit card company multiplies your average daily balances by your daily periodic interest rate (your card’s APR, divided by 365).

The average daily balance method may not be the only method credit card companies use to calculate interest, but it’s extremely common. If it’s not indicated on your credit card statement, you can call your issuer to find out exactly how your issuer calculates your interest.

How To Calculate Average Daily Balance?

In theory, calculating your average daily balance at any time during the billing cycle is simple, if tiresome. Add up your daily balances from the current billing period and divide by the number of days elapsed in the billing period so far. Because your credit card statement won’t typically display daily balance figures, this leaves you the extra step of piecing it together using your transaction records which may not be a particularly fun process.

Your calculation will look like this:

(day 1 balance + day 2 balance + day 3 balance + … day 30 balance) / Number of days in billing cycle

For example, if you charged $50 to your credit card on the first day of a 30-day billing period, made a $250 charge on the 5th day (bringing your combined balance to $300) and made another $200 charge on the 20th (for a $500 total balance), the total of your daily balances would be $9,750. That’s a $50 balance each on days 1 to 5, $300 on days 6 to 20 and $500 on days 21 to 30. Your average daily balance then divides it by the number of days in your billing period—in this case 30—to calculate an average daily balance of $325.

How Do You Check Your Average Daily Balance?

Your credit card company will make these calculations at the end of your billing period so they can send you a bill and collect what you owe plus any interest. You’ll need to get into the weeds yourself if you want to check your average daily balance and your current interest situation at other points during the billing period. This process may be helpful with managing your spending and repayment in a smart, cost-effective way.

We’ve created our Average Daily Balance Calculator to help make this easy. To use it, you’ll simply need to have the following information on hand:

• The start date of your current billing period
• How much balance you’re carrying over from the previous billing period, if any
• How much you’ve charged to your card each day of the current period
• Any payments you’ve already made towards your bill during the current period

You’ll find this information on an up-to-date credit card statement reflective of your current balance. Your transaction records are key in pointing to how much your balance has changed day to day so far during the billing period.

Bottom Line

Credit card interest rates can be intimidating and frustrating to work with, since it’s easy to feel like nothing is quite as simple as it seems. With a little time—and the right tools on hand—cardholders can even be a step ahead of the issuer in determining the level of credit card debt and how much interest it can cost them when carrying a balance.

Frequently Asked Questions (FAQs)