What is Available Balance?
Your available balance is the total amount of money in your account that you can use for purchases and withdrawals, as it excludes pending transactions and check holds from your account balance. However, the available balance will not show checks that haven’t been cashed or deposits which haven’t posted.
The available balance is the balance in checking or on-demand accounts that is free for use by the customer or account holder. These are funds that are available for immediate use, and includes deposits, withdrawals, transfers, and any other activity that has already cleared to or from the account. A credit card account’s available balance is normally referred to as available credit.
An account holder’s available balance may be different from the current balance. The current balance generally includes any pending transactions that haven’t been cleared.
introduction of Available Balance
As noted above, the available balance represents the funds available for immediate use in a customer’s account. This balance is updated continuously throughout the day. Any activity that takes place in the account—whether that’s a transaction done through the teller, an automated teller machine (ATM), at a store, or online—affects this balance. It does not include any pending transactions that have yet to clear.
When you log into your online banking portal, you will normally see two balances at the top: The available balance and the current balance. The current balance is what you have in your account all the time. This figure includes any transactions that have not cleared such as checks.
Depending on both the issuing bank and the receiving bank’s policies, check deposits may take anywhere from one to two days to clear. This process may take much longer if the check is drawn on a non-bank or foreign institution. The time between when a check is deposited and when it is available is often called the float time.
A customer’s available balance becomes important when there is a delay in crediting funds to an account. If an issuing bank has not cleared a check deposit, for example, the funds will not be available to the account holder, even though they may show up in the account’s current balance.
Ways to Use Available Balance
The available balance can be utilized by the bank account holder in the following ways:
Cash withdrawal: The available balance can be taken out of the account in cash at an ATM or with a bank teller.
Expenditure via debit card: The debit card transfers money from the money in the checking account. Hence, the available balance can be accessed by swiping the card at a card reader or shopping online through the card.
Writing a check: Upon writing a check, even though it may take a few days for the expense to be indicated in the account balance, the funds are no longer available to be spent/withdrawn.
Paying the bills: Available balance can be utilized for online bill payments.
Using the Available Balance
Customers can use the available balance in any way they choose, as long as they don’t exceed the limit. They should also take into consideration any pending transactions that haven’t been added or deducted from the balance. A customer may be able to withdraw funds, write checks, do a transfer, or even make a purchase with their debit card up to the available balance.
For example, your bank account balance can be $1,500, but your available balance may only be $1,000. That extra $500 may be due to a pending transfer to another account for $350, an online purchase you made for $100, a check you deposited for $400 that hasn’t cleared yet because the bank put it on hold, and a pre-authorized payment for your car insurance for $450.
You can use any amount up to $1,000 without incurring any extra fees or charges from your bank. If you go beyond that, you may go into overdraft, and there may be issues with the pending transactions.
Why is Available Balance Usually Lower than Current Balance?
Many times, the available balance reflected is lower than the current account balance at a given time. It happens when the deposits to the account are yet to be cleared or when there is a pending withdrawal of money against the account.
When funds are deposited in the bank account, they might not be immediately available for use. The bank takes a few days to verify the legitimacy of the transaction and holds the money until that time.
In the U.S., banks generally provide the account holder access to $200 by the next business day. Funds from transactions, such as tax refunds from the government, checks from overseas, personal checks, etc., take a longer time to be released by the bank. In some cases, cashier’s checks are also held for extra days.
Banks put the holds in place for the protection of the customers. Suppose an individual receives payment from a creditor via a check worth $300 and deposits it in the bank. After an hour, the bank allows him to utilize the funds to make an online purchase.
If the check bounces, the individual would need to replace the funds in their account and also incur some penalty imposed by the bank. Thus, withholding access to the money by the time the check’s cleared will avoid such troubles for the account holder.
Whenever an individual schedules an upcoming payment through the bank’s online bill pay feature, the funds are no longer available to them for use. The bank deducts that amount from the available balance. Any payment made by swiping the debit card has a similar effect on the available balance.
Sometimes, when making a payment by a debit card, the merchant may authorize more than the billing amount as a guarantee, leading the bank to withhold more money from the account holder. Hotel and car rental holds are becoming common nowadays.
A car rental company may charge a $100 hold against one’s account to cover for any possible damage to the vehicle. The hold is released when the car is returned undamaged. For the duration of the hold, $100 is deducted by the bank from the person’s available balance.
In the case of hotels, the hold covers both potential damages to the property and additional charges like room service or purchases made at the hotel. It is usually released at the end of the individual’s stay at the hotel or within a day after check-out.
There are cases that can affect your account balance—both negatively and positively—and how you can use it. Electronic banking makes our lives easier, allowing us to schedule payments and allow for direct deposits at regular intervals. Remember to keep track of all your pre-authorized payments—especially if you have multiple payments coming out at different times every month. And if your employer offers direct deposit, take advantage of it. Not only does it save you a trip to the bank every payday, but it also means you can use your pay right away.
Let the current balance and available balance in Tim’s account both be $50. Suppose Tim purchases a shirt for $30 at a store with his debit card. The seller can ask Tim’s bank to preauthorize the payment.
The bank would thus place a hold on Tim’s account for $30. As the debit card transaction is yet to be posted to his account, his current balance would be $50, but the available balance would only be $20. When the seller submits the transaction for payment, the bank will post it to Tim’s account, after which the current balance will also be reduced to $20.