To avoid an overdraft, check your available balance before making a withdrawal, purchase or writing a check to ensure you have sufficient funds. Seeing the terms “current balance” and “available balance” listed on your bank statement or mobile banking app may confuse you. If you’re wondering how much money you really can spend, rely on your available balance to tell you how much funds you have at your disposal. Your available balance accounts for pending transactions, but your current balance does not. Because neither balance accounts for checks you have written but that have not yet been cashed, you need to keep track of those and deduct them from the balance.
Banks and credit unions provide you with both your current and available balances so that you can have the most accurate view of all of your funds, where they’re going and how much you have to spend at any given time. To understand how your current balance and available balance differ, this article covers their details so you can better navigate your personal finances and avoid an overdraft.
Your current balance, also known as your account balance, refers to the total amount of money in your account before any pending debits or credits are considered. Think of your current balance as your balance at that exact moment before pending transactions clear.
Outstanding checks, automatic payments you’ve set up, recent purchases or withdrawals that haven’t been processed won’t be included in your current balance. Because some transactions may not process until the next business day or even longer, your current balance may show a different amount than what you actually have available to spend.
Your available balance subtracts both pending transactions, posted transactions and check holds, showing you how much money you actually have available to spend. However, your available balance typically doesn’t account for checks that recipients haven’t cashed or deposits — including direct deposits — that haven’t posted yet. So keeping track of checks you’ve used and deposits you’ve made can help you stay on top of your finances even better. Knowing how much you have available can help you avoid overdraft fees when making purchases or bill payments.
Breaking down the differences between your current and available balances can help you avoid fees and overdrafting your account.
Your current balance — or account balance — indicates your actual balance at the moment, not what you have available to spend. Your current balance:
Your available balance includes information from items that have been fully processed as well as pending transactions. Your available balance:
Your available balance won’t include items for which funds have yet to be either requested or authorized. Depending on your bank, these may include things like:
Knowing your available balance can make it easier to decide how much to spend if you’re deciding to make a new purchase.
For example, say your current balance shows $100, but you have pending transactions for $60 worth of groceries. Your available balance shows $40, but before that pending transaction clears, your internet company automatically bills you $50. That would leave your account with a negative available balance (minus $10) even though your current balance may still reflect a higher amount.
You may get charged an overdraft or, if you’ve opted out of overdraft protection, your internet bill payment might even get declined. So, if you have overdraft protection and want to avoid an overdraft fee, you would need to deposit at least $10 into your account — without any hold being placed on that deposit — before the pending transaction of groceries fully processes. If you fail to do so, any resulting overdraft fee you incur would be added to the deficit in your account.
Your available balance is the most accurate indicator of what you can spend without causing an overdraft because it shows you what you actually have available to spend, including pending payments and withdrawals that haven’t been fully processed. Current balances are less accurate in terms of what you have to spend because they don’t include pending transfers or payments that haven’t been completely processed yet. To make an informed decision on spending, check your available balance to ensure you have the money to cover your purchase to avoid overdraft fees.
It can be easy to overdraw your account if you initiate frequent transactions or forget when an automatic withdrawal is occurring. You can keep track of your available balance using several strategies.
Keeping track of your spending is important whether you’re dealing with debit card transactions, savings accounts or credit cards. Poor spending habits can lead to credit problems if you overextend yourself and have difficulty making payments. Self provides tools to stay on track and improve your credit score as you build credit by managing your spending and payments effectively.
Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.
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