If I recently opened a revolving charge account and my credit limit was $1000. I haven't charged that much.

Question

On my recent statement the beginning balance is $600 and I made a payment on 3/10 of $200. I charged purchases of $80 on 3/5, $100 on 3/15 and $50 on 3/30. The interest I paid in March was 16%. On the backe of my statement says that interest was charged using the average daily balance method including current purchases.
What would my interest for March be using the average daily balance method?
Someone please help, I don't quite understand what my daily average balance is!!

Answer 1

The specific dollar amount of interest you paid should be written on your bill. Usually, it's the last item in the detailed list of transactions done on your account.

Answer 2

If you don't pay off your account in full at the end of every month, then the company will look at how much money you owed on average for each day of the statement period.

To make this easy, Iand approximate) let's say you get a bill in February for $1000 in a billing period that closed February 1. You pay $100 February 14. You don't buy anything in Feb. The interest rate is 1% per month.

Your balance from 2/1-2/14 was $1000. Your balance from 2/14-2/28 was $900. Your average daily balance was $950. Your finance fee will be 1% of 950, or $9.50.

Let's say that on February 14, you actually charged $200. Now, your daily balance from 2/1-2/14 was $1000. From 2/14-2/28, it was $1100 (1000 minus 100, plus 200). Your average daily balance is $1050. Your finance fee is $10.50.

The reason this is so insidious is that you don't remeber that you're paying that money every single day in effect. Let's say you paid the $1000 bill on 2/14. And, let's say you charged $1000 on 2/14. Your daily balance from 2/1-2/14 was $1000. Your daily balance from 2/14-2/28 was $1000. However, you pay zero finance charge, because you paid your bill in total. So, you get to keep owing them $1000 and never pay a finance charge.

This is a simplified example, and by the way, your actual interest rate is probably a lot closer to 2% per month than the example rate of 1%.

I hope this helps.

Answer 3

The number is calculated by adding the daily balances over a period of time and dividing by the total number of days in that period.

So days 1 to 4 , $600
day 5 to 10, 680 because of the purchase
11-14 , 480 , because 200 payment
15, 580, purchase 100
16 -29 , balance 580
30,31 balance 630 , purchase 50

They average the daily balances over the number of days and then calculate the interest on that.

You need to know if payments are credited on the day paid or only when your account is processed.

Answer 4

Take you balance on March 1. Add your balance on March 2. Add Your balance on March 3. Repeat for every day in March. Divide the total by 31 (the number of days in March). This gives you your "Average Daily Balance. Multiply that by your "Periodic Interest Rate" (usually 1/12th of your annual rate) to get the interest charged in March.

NOTE: I doubt your statement period is actually from the 1st of the month to the 1st of the following month.

Answer 5

Take your balances each day and divide by the number of days.
1 600
2 600
3 600
4 600
5 680 (+80)
6 680
7 680
8 680
9 680
10 480 (-200)
11 480
12 480
13 480
14 480
15 580 (+100)
16 580
17 580
18 580
19 580
20 580
21 580
22 580
23 580
24 580
25 580
26 580
27 580
28 580
29 580
30 630 (+50)
31 630

Total the numbers in the second column and divide by 31 to get your average daily balance. (Check my addition and subtraction too and see if I missed anything.)

[this assumes your interest is accrued daily and compounded monthly]

Answer 6

forget those numbers... use 10, 20 and 30... if for first 10 days got charged $10 for something bought on day one[10x10], then bought something for another $10 for total of $20 on the 10th day, [20x10]and on the 20th day you bought something for $another $10 for total of [30x10]. So that equals 100+200+300=600 for the month.. added daily interest. Not a perfect explaination, but it gets the point across, I hope. And that is only adding to it.. anything you pay off works the same way for some credit card, but for others, it stays on until you get your bill and they acknowledge your payment. What you bought during the last 10 days does not apply for your first 20 days. But what you bought first, applies for the entire month.