Common use of Finance Charge Calculation Method: Average Daily Balance (Including Current Transactions Clause in Contracts

Finance Charge Calculation Method: Average Daily Balance (Including Current Transactions. We figure the interest charge on your account by applying the monthly periodic rate to the “average daily balance” of your account. To get the “average daily balance,” we take the beginning balance of your account each day, add any new purchases/cash advances and fees, and subtract any payments, credits, and unpaid interest and finance charges. This gives us the daily balance. Then we add up all the daily balances for the billing cycle and divide by the total number of days in the billing cycle. This gives us the “average daily balance.