How to Calculate Average Monthly Bank Balance

MAB Formula:

\[ MAB = \frac{\sum \text{Daily Balances}}{\text{Days in Month}} \]

MAB (dollars):

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1. What is Monthly Average Balance?

Monthly Average Balance (MAB) is the average amount of money maintained in a bank account over a specific month. It's calculated by summing up the closing balance of each day and dividing by the number of days in that month.

2. How Does the Calculator Work?

The calculator uses the MAB formula:

\[ MAB = \frac{\sum \text{Daily Balances}}{\text{Days in Month}} \]

Where:

$ MAB $ — Monthly Average Balance (dollars)
$ \sum \text{Daily Balances} $ — Sum of all daily closing balances (dollars)
$ \text{Days in Month} $ — Number of days in the month (count)

Explanation: This calculation helps banks determine if account holders meet minimum balance requirements and assess account maintenance fees.

3. Importance of MAB Calculation

Details: MAB is crucial for avoiding penalty charges, qualifying for premium banking services, and maintaining healthy banking relationships. Many banks require a minimum MAB to waive maintenance fees.

4. Using the Calculator

Tips: Enter the total sum of daily balances in dollars and the number of days in the month. Ensure all values are positive and the days count is between 1-31.

5. Frequently Asked Questions (FAQ)

Q1: Why do banks calculate MAB?
A: Banks use MAB to ensure customers maintain minimum balances, assess account maintenance fees, and determine eligibility for various banking services and benefits.

Q2: What happens if MAB falls below minimum requirement?
A: Banks typically charge penalty fees ranging from $5 to $25, depending on the account type and the extent of the shortfall.

Q3: How can I increase my MAB?
A: Maintain higher balances throughout the month, avoid large withdrawals, time your deposits strategically, and consider consolidating accounts.

Q4: Do weekends and holidays affect MAB?
A: Yes, every day counts including weekends and holidays. The closing balance of each day is included in the calculation.

Q5: Is MAB the same as daily balance?
A: No, MAB is the average of daily closing balances over a month, while daily balance refers to the amount in the account at the end of a specific day.