How is the Average Daily Balance calculated in Servicing Director for a HELOC loan
Calculating the Average Daily Balance
If you want to calculate your own finance charge, you have to know your credit card balance for each day of the billing cycle. While your credit card statement won't list each day's credit card balance, you can use your statement (or your online transaction log) to figure out the balance.
Start with the balance at the beginning of the billing cycle. Then, add or subtract from the balance each day you have new transaction.
For example, your APR is 12% and your billing cycle is 25 days long.
You started the billing cycle with a balance of $100. On Day 4, you made a $100 purchase. On Day 20, a $25 payment was credited to your account.
Your daily balance for each day during the billing cycle would be:
Day 1 – 3: $100
Day 4 – 20: $200 ($100 purchase)
Day 20 – 25: $175 ($25 credit)
To calculate your average daily balance, you must total your balance from each day in the billing cycle (even the days that your balance didn't change) and divide the total by the number of days in the cycle.
(Day 1 Balance + Day 2 Balance + Day 3 Balance…) / number of days in billing cycle
$4575 / 25 = $183
Calculating the Average Daily Balance Finance Charge
Calculating the average daily balance is the hardest part. From there, you simply multiply by your credit card's APR and number of days in the billing cycle to calculate the finance charge.
Based on the details listed above, your finance charge using the average daily balance method would be:
$183 * .12 * 25 / 365 = $1.50
If you continued making minimum payments and no additional charges on this account, you'd pay $18.00 in finance charges over the course of a year.
Environment:
Edit HELOC Draw screen
ArticleNumber:
000055068
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