B Average Daily Balance for 2 consecutive months

[chirhone]

What does the term "average daily balance for two consecutive months" mean? For example. Suppose the account has $1 from February 1 to March 30. And it suddenly has $1 million dollars for March 31. If the penalty is charged if it's below $5. Does the big amount entered in the March 31 makes the average daily balance for two consecutive months above $5?

 

[FactChecker]

You are correct according to the strict mathematical definition of average. There may be fine print in a bank contract or something in their processing that makes a difference. For instance, they may just take two sequential monthly statements, regardless of what days of the month they represented, and use that as the average.

 

[mfb]

From a mathematical side the average will be high, but who knows what the fine print specifies. Among other questions: Is the value taken for a day at a specific point in time during that day? Or averaged over multiple points, too? Are we sure the 1 million count at that time?

For instance, they may just take two sequential monthly statements, regardless of what days of the month they represented, and use that as the average.

That would be a strange way to calculate a "daily average".

 

[PeroK]

View attachment 257142

What does the term "average daily balance for two consecutive months" mean? For example. Suppose the account has $1 from February 1 to March 30. And it suddenly has $1 million dollars for March 31. If the penalty is charged if it's below $5. Does the big amount entered in the March 31 makes the average daily balance for two consecutive months above $5?

In the UK the idea is that you need to have a salary or pension paid in at least once a month. It's two consecutive months in case there is a delay in paying your salary, or funds being cleared, and to avoid problems with holidays and weekends.

The daily balance is taken at the close of business each day.

 

[pbuk]

The calculation of an average daily balance is a standard process in banking and it would be unusual (and unacceptable to a regulator) to redefine it in the 'small print' of an agreement. However note that it may well not apply to the 'statement balance', instead applying to 'cleared funds' or some other defined term and in the circumstances described there is no way of knowing if the $1m is counted on 31 March.

Also the drafting is not as clear as it could be: does it mean

1. the average daily balance (ADB) for the month of February and the ADB for the month of March are both below the required amount;
2. the ADB calculated over the inclusive period 1 February to 31 March is below the required amount; or even
3. the ADB calculated over any 2 month period (e.g. 31 January to 30 March inclusive) is below the required amount?

I think 1 is the most likely (and in the absence of clarification elsewhere in the agreement is IMHO therefore the one that is likely to be upheld in any dispute), and 3 is unlikely. So in the circumstances described, the ADB for February is $1 which is below the required amount of $5 but the ADB for March is (30 x $1 + $1,000,000) / 31 which is above the required amount and so the penalty may not be charged.

Note that this is different from the interpretation I infer from other posts which is that of 2. above where the ADB (in a leap year) would be ((29 + 31) x $1 + $1,000,000) / 60.

 

[gmax137]

@chirhone you have four responses that boil down to, "I don't know." I think you need to call the bank and ask them.

 

[chirhone]

@chirhone you have four responses that boil down to, "I don't know." I think you need to call the bank and ask them.

Customer service has different answers. I guess i have to ask the city main bank manager for clarity.