Average Balance
The typical or mean amount an account holds over a defined period.
Detailed Description
Average Balance
What is the formula to calculate Average Balance?
Average Balance = (Sum of Daily Balances) / (Number of Days)
How does Average Balance affect banking fees?
Many banks impose fees based on maintaining a minimum average balance; falling below this can incur additional charges.
What is the difference between Average Balance and Total Balance?
Average Balance smooths out fluctuations over time, while Total Balance reflects the current amount in the account.
Why is Average Balance important for banks?
It reflects account stability and customer loyalty, influencing service offerings and eligibility for products.
How is Average Balance used in business banking?
It aids in cash flow management, assessing liquidity, and improving creditworthiness for loans.