Average Daily Balance Method

Average Daily Balance Method

A finance/accounting method where costs (and interest) are based on the amount(s) owing at the end of each day.

Notes:

Most department store credit cards use this system. Interest payable is calculated daily, this results in less interest payable because payments on the card lower the interest payable immediately.

We should note that the interest rate on department store credit cards are usually higher than normal credit cards, so this isn't to say that there is a huge interest savings.

See also: Adjusted Balance Method, Credit Card, Past Due Balance Method, Previous Balance Method