Average Balance

The balance on a loan or depositary account. A simple average balance is calculated by dividing the beginning balance plus the ending balance by two.

A weighted average balance will take into account how long the balance remained at specific levels during the measurement period, which is typically a month or a financial quarter long.

Average balance is more commonly used when referring to an average daily balance, particularly when charging interest on loans. Since banks are not permitted to charge interest on interest, any payments are applied first to interest payments due, and then to principal. 

For investors who trade on margin accounts, the average balance may be used to determine margin requirements or any margin calls that the brokerage makes.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Average balance —   The balance made up of the average of the daily balances over a period of time (such as a month or quarter) …   International financial encyclopaedia

  • average balance — mean balance of an account during a particular period …   English contemporary dictionary

  • average balance — /ˌæv(ə)rɪdʒ bæləns/ noun the balance in an account calculated over a period …   Dictionary of banking and finance

  • Average Collected Balance — The average balance of collected funds (less any uncleared or uncollected deposits) in a bank account over a specified period, usually one month. The average collected balance is calculated by adding the daily collected balance and… …   Investment dictionary

  • average daily balance — daily balances; average daily balance The various balances for the different days in the period for which interest is to be paid, and the average daily balance for the interest period means the sum of these daily balances divided by the number of …   Black's law dictionary

  • Balance —   The amount in an account. See also Cleared balance, Available balance, Average book balance, Average value date balance, Average balance and Value balance …   International financial encyclopaedia

  • Average Annual Yield — The average yield on an investment or a portfolio that results from adding all interest, dividends or other income generated from the investment, divided by the average of the investments for the year. The average annual yield is a particularly… …   Investment dictionary

  • Average book balance —   Average of the balance as per the books, irrespective of the value dates of the related transactions. See also Cleared balance, Available balance and Value balance …   International financial encyclopaedia

  • average — I (midmost) adjective center, centermost, intermediate, mean, mean proportioned, medial, median, mediate, medium, mid, middle, middle class, middle grade, middlemost, middling associated concepts: average annual earnings or wages, average capital …   Law dictionary

  • Average value date balance —   Average of the balances as per the value dates. See also Average book balance …   International financial encyclopaedia

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