1. What is Average Monthly Balance?

Average Monthly Balance (AMB) is the average of all daily closing balances in a bank account over a specific period, typically a month. It's commonly used by banks to determine if account holders meet minimum balance requirements.

2. How Does the Calculator Work?

The calculator uses the AMB formula:

Where:

• \( \sum(Daily\ Balances) \) — Sum of all daily balances
• \( Days \) — Number of days in the period

Explanation: The formula calculates the simple average of daily account balances over a specified time period.

3. Importance of AMB Calculation

Details: Banks use AMB to determine if customers maintain required minimum balances, assess account maintenance fees, and evaluate customer relationship value. For individuals, tracking AMB helps with financial planning and avoiding bank charges.

4. Using the Calculator

Tips: Enter daily balances as comma-separated values (e.g., "1000, 1500, 1200") and the number of days. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why do banks calculate Average Monthly Balance?
A: Banks use AMB to ensure customers maintain minimum balance requirements and to determine applicable fees for accounts that fall below the threshold.

Q2: How is AMB different from daily balance?
A: Daily balance is the amount in your account at the end of each day, while AMB is the average of these daily balances over a specific period.

Q3: What happens if my AMB falls below the required minimum?
A: Most banks charge a penalty fee when your AMB falls below the minimum requirement for your account type.

Q4: Can I improve my AMB by having a high balance for just a few days?
A: Yes, since AMB is an average, maintaining a higher balance for some days can compensate for lower balances on other days.

Q5: Do weekends and holidays affect AMB calculation?
A: Yes, AMB includes all days in the period, including weekends and holidays, using the closing balance of each day.