A clear, friendly guide to help you understand how the average daily balance works and why banks use it.
Understanding the Average Daily Balance
The average daily balance is a method banks use to calculate certain fees, interest, or account requirements. Even though it sounds a bit technical, the idea is actually very straightforward.
The average daily balance is simply:
The total of all your account balances for each day in a month, divided by the number of days in that month.
Think of it as your account’s “typical” balance over the entire statement cycle.
Why Do Banks Use the Average Daily Balance?
Banks often rely on the average daily balance to:
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decide if you qualify for fee waivers
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offer discounts or special account perks
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calculate interest on savings or charges on credit products
It gives them a fairer picture than just checking the balance on one random day.
How It Works (Simple Example)
Imagine your account balances for a 5-day period look like this:
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Day 1: 3,000,000 VND
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Day 2: 3,000,000 VND
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Day 3: 1,000,000 VND
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Day 4: 2,000,000 VND
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Day 5: 2,000,000 VND
Add them up:
3,000,000 + 3,000,000 + 1,000,000 + 2,000,000 + 2,000,000 = 11,000,000
Then divide by 5 days:
11,000,000 ÷ 5 = 2,200,000 VND
So your average daily balance for those 5 days is 2,200,000 VND.
If your bank requires a minimum average daily balance of 2,000,000 VND to waive a monthly fee, you’d qualify.
Why It Matters to You
Understanding your average daily balance can help you:
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Avoid monthly service fees
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Keep your account in good standing
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Qualify for higher interest rates or perks
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Plan spending more smartly
It’s often more important than your balance on one specific day—what really counts is how your balance looks across the whole month.
Average Daily Balance vs. Minimum Daily Balance
These two terms can be easy to mix up:
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Minimum daily balance looks at the lowest balance in your account during the month.
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Average daily balance takes the average across all days.
Banks choose whichever method they prefer, so it’s always good to check your account disclosures.
Final Thoughts
The average daily balance is simply a way for banks to measure how much money you typically keep in your account during a month. Once you understand how it’s calculated, it becomes much easier to manage your account, avoid fees, and take advantage of better financial benefits.
If you track your balance regularly—even roughly—you’ll know exactly where you stand each month.
Please take a look at this as well:
What Is a Banking Center? – Simple and Easy Explanation
