The Difference Between Current Balance And Available Balance
Have you recently incurred an overdraft penalty fee? If yes, you don’t need to panic, as it can sometimes happen to even the keenest budget keepers. One of the most common reasons for this is not being aware of the difference between available and current balances.
As online banking is on the rise and people no longer feel the need to manually balance their checkbook, learning your bank account’s current balance versus available balance will make it clear how much money you “actually” have.
What Does Current Balance Mean?
When speaking to a branch teller to inquire about your money in the bank account or looking at your balance online on the banking app, the figure that you hear or see is your current balance. It includes any pending transactions like pending credit card payments or uncleared checks. But you will soon realize that this is not the real value of your funds.
What Is the Available Account Balance?
The available balance is the actual money present in your account that you can easily use for ATM withdrawals, debit card purchases, sending money, or paying bills via online banking.
Why Is My Available Balance Higher or Lower Than My Current Balance?
There are 6 reasons why your current and available balance can vary:
- Pending Transactions: Late reflection of transactions available balance after a purchase or deposit can result in a difference.
- Transaction Holds: Transactions related to credit or debit card can sometimes cause a hold on the funds.
- Processing Delays: Another reason why your available balance vs current balance can be different is the delay in processing linked to checks or electronic transfers.
- Overdraft Protection: Although this service provides temporary relief from the insufficient fund’s fees. In the end, the bank will charge you for their service, and you’ll have to pay the overdrafted amount. So, your actual or available balance will decrease.
- Outstanding Checks: Your written checks that have not yet been cashed or cleared might not affect your available balance until processed by the recipient’s bank.
- Bank Fees: Monthly or annual bank charges can also create discrepancies between current and available balance.
Can I Spend My Current Balance?
Yes, you can spend the money in your current account balance, but make sure you know how much money is going to be withdrawn from your account in terms of unprocessed payments or checks that you have issued that still need to be cleared.
To make it easier for you, here’s an example that demonstrates the difference between the available balance and the current balance.
Initial Balances
- Current Balance: $500
- Available Balance: $500
Online Shopping Purchase
- You decide to make an online purchase for a gadget, spending $200.
- Current Balance: $500 (unchanged, as the transaction is pending)
- Available Balance: $300 (reflecting the deduction of $200 for the pending online purchase)
Automated Bill Payment
- An automated bill payment of $150 is scheduled to be deducted from your account.
- Current Balance: $500 (unchanged from the pending online purchase)
- Available Balance: $150 (reflecting the deduction for both the pending online purchase and the scheduled bill payment)
Result: While your current balance still shows $500, your available balance is now $150, indicating the amount you can spend without incurring overdraft fees.
In 2019, banking customers paid a whopping $11 billion in overdraft fees. You surely don’t want to be one of those people.
To make better and smarter financial decisions, consider the pending and scheduled payments to avoid overdraft fees and ensure your spendings align with your available balance.
Which Balance Shows The Amount Of Money You Can Use Now?
Available balance is the money you fully own and can use it wherever you like.
✓ Retrieve cash from an ATM
✓ Settle a bill through online payment
✓ Transfer funds to a friend
✓ Make an in-person withdrawal at a bank
✓ Utilize a debit card for purchases
✓ Issue a check against your account
Deposited Funds Coming in Late
This is probably another reason why your current and available balance may not match. Let’s understand this with an example.
You started with $700 in your account, both in the current and available balances. You got a $1,200 check and put it in. The bank decided to give you $300 right away, so your current balance jumped to $1,900, but the available balance was $1,000, including that quick $300.
Then, you went and spent $700 with your debit card. Your current balance stayed at $1,900, but your available balance dropped to $300, considering what was available and what you spent. Now, there’s $900 from the check still waiting to be processed, but for now, both balances remain at $1,900 and $300.
Once the bank finished processing the check, the full $1,200 became available. So, your current balance and available balance is $1,900.
Summing Up
At any given time, your account has two different balances. Current and Available.
For customers with a checking account, the available balance is the funds that can be used(withdrawn, transferred, etc) right away. Opposingly, the current balance is the amount from which deductions (exp pending checks) are yet to be made.
Knowing your available balance is important to avoid hefty overdraft fees and other penalties.
FAQs
Which account balance includes pending transactions?
The current account balance includes the transaction that still needs to be paid.
Does the available balance include pending transactions?
No. Available balance means that everything you owe others has been paid off. And the money in your account is entirely yours.
Why is my available balance less than my current balance?
The bank has deducted the amount of checks that you wrote or paid to the respective vendor.
What is overdraft protection?
Overdraft protection is a banking service that covers transactions exceeding your account balance, preventing declined transactions and penalties.
What is an overdraft fee?
It’s the fee you pay for overdraft protection. The bank charges you to fill the shortfall amount to help avoid refused transactions. The fee varies from bank to bank.
When will my current balance become available?
You may have to wait for 2-3 business days until the funds are visible in your current balance.
