If you’ve ever opened a bank account, you’ve most likely heard the term average daily balance. Also called ADB, it is usually mentioned as a minimum amount.
Most accounts require an ADB but others waive it to attract more customers. When you see “no minimum maintaining balance,” this means an account has no ADB requirement.
If you want to understand what ADB is and how it’s calculated, keep reading.
How does an average daily balance work?
Your daily balance is the amount of money in your account at the end of the day. The average amount of your daily balances over a certain period – usually one month – is your ADB.
How to calculate an average daily balance
Add all your daily balances for the month, then divide the sum by the number of days in the month.
For example:
You deposited P2,000 in a new bank account on Day 1 and left the money there until the end of a 30-day month without adding more money. The sum of your daily balances would be P60,000 (P2,000 x 30 days). Your average daily balance would then be P2,000 (P60,000 / 30 days).
Simple enough, right? But what happens if you deposited the P2,000 on the 16th of the month instead? You would then have an ADB of P1,000 (P2,000 x 15 days = P30,000 / 30 days).
How to reach the required average daily balance
What if you only started depositing in your new bank account after a few days? Can you still meet the required monthly ADB? Yes, but you will need to put in a larger amount. Follow the formula below:
Deposit amount = (minimum required ADB x time period) / remaining days
Let’s say the required monthly ADB is P2,000 and you only have 15 days left in a 30-day month.
Using the formula, your deposit amount = (P2,000 x 30 days) / 15 days
The answer is P4,000. This means you need to deposit and keep at least P4,000 in your account to meet the required ADB.
So, the later you put money in, the larger the amount you’ll need.
Things to remember
When you open an account that has a required ADB, it’s much easier to deposit money on the day your account is created. The date of your first deposit will determine the balance you’ll need to maintain.
There are fees for failing to meet the required average daily balance. These usually apply if you don’t have enough in your account for two consecutive months.
To avoid fees, remember to put enough money in your account right away and keep depositing over time.
