Simple English definitions for legal terms
Read a random definition: dry hole
Daily balance: The final accounting for a day on which interest is to be accrued or paid.
Average daily balance: The average amount of money in an account (such as a bank account or credit-card account) during a given period. This amount serves as the basis for computing interest or a finance charge for the period.
For example, if you have a bank account with a balance of $1000 on Monday, $2000 on Tuesday, and $1500 on Wednesday, the daily balance for each day would be $1000, $2000, and $1500, respectively. The average daily balance for the three-day period would be $1500 ((1000+2000+1500)/3).
Another example would be a credit card account with a balance of $500 on Monday, $1000 on Tuesday, and $0 on Wednesday. The daily balance for each day would be $500, $1000, and $0, respectively. The average daily balance for the three-day period would be $500 ((500+1000+0)/3).
These examples illustrate how the daily balance and average daily balance are calculated for different types of accounts. Understanding these balances is important for calculating interest or finance charges accurately.