You will see two balances associated with most credit and debit accounts: a current balance and an available balance. While the amount of money reflected in these balances is usually the same, there are some times when they differ.
Any time money enters or leaves your checking account; you will see a variation in your current and available balances. Knowing the differences between a current balance vs. available balance is essential for those striving for good financial habits.
Check out the information below for everything you need to know about current and available balances.
What Is the Current Balance vs. Available Balance in My Bank Account?
So, what’s the difference between your current balance and your available balance? Your current balance is how much money you have in your account, minus any pending transactions. Your available balance reflects the amount of available credit you have to actually spend.
For example, suppose you have a few outstanding checks. In that case, you may see debit transactions for those checks reflected in your available balance but not your current balance. Those checks are still being processed and are considered pending transactions.
What Are Pending Transactions?
Pending transactions are processing credit or debit payments that have yet to enter or leave a person’s bank account. For example, say you make a debit card transaction at 9:00 AM. The transaction may not entirely go through until later in the afternoon or even the next business day. During this time, that debit transaction is considered pending.
Another form of pending transaction happens when you receive credit deposits. Credit deposits can be anything from direct deposits from an employer or home loan funding from an equal housing lender.
When your employer pays you via ACH direct deposit, you may see the funds on your available balance sooner than you will see them on your current balance. Thankfully, while your ACH deposit goes through, you usually have access to that money. For instance, say your paydays are on Friday, but right now, it is Thursday, and you have $20 in your checking account. On Friday, you may still see that the current balance of your checking account is still $20, while your available balance is the amount of your scheduled paycheck, plus that $20. In this case, you would be able to spend the funds reflected in your available balance, even though you are seeing you still have only $20 in your account.
Why Are My Current and Available Account Balances Different?
Have you ever noticed that the amount of money shown in your current balance and your available balance are different? This is because it takes time for debit and credit transactions to process and go through on your financial accounts.
Debit transactions like purchases on your debit card may take a few business days until you see them reflected on your current balance. However, these transactions are typically reflected right away on your available balance.
Credit transactions such as an ACH direct deposit from your place of work may also take one or two business days to show up on your current balance. But, these transactions should show up in your available balance right away as well.
While pending transactions are processed, you will see them in your available balance but not your current balance. During this time, your current balance and available balance will be different. Once all your pending transactions go through, your current and available balances should be identical again until the next debit or credit transaction.
How To Check Your Available and Current Balances
For the most part, every major bank and financial institution offers free mobile banking services where account owners can check their available and current balances. Simply go to your bank’s site online and log into your account to view these two balances. From there, you can go to your account history and search through your most recent transactions. Purchases and transactions from the past few days are most likely reflected in your available balance, but perhaps not on your current balance just yet.
To make things easier, banks usually put your available balance in a prominent place, so you are able to view the total amount you have to spend right when you log into your account. Once you know exactly how much money you have available, you can pay bills and make other purchases without worrying about overdrawing.
Can I Use My Current Balance vs. Available Balance?
A personal finance tip for keeping a tight budget is to check your available balance before you spend money.
Never assume your current balance is the same as your available balance. You may have a debit or credit transaction in progress that is not yet reflected in your available funds. If you spend money based solely on what you see in your current balance, you run the risk of pending transactions causing you to overspend.
An overdraft fee is just one of the consequences of overdrawing from your bank account. Suppose you unknowingly overdrew from your account and had a series of electronic payments scheduled to go through. When this happens, there is a possibility that those scheduled payments will fail to process. This failure may cause you to make payments late or miss them altogether. Note payment history is one of the most important factors contributing to your credit score. Missing payments or making them late may negatively affect your credit score for up to seven years. If you want to improve the payment history on your credit report, you should always reference your available balance, not your current balance, when spending money. Then, you don’t have to worry about overdraft fees or other inconveniences that come with overspending on your checking account.
Keeping track of your available balance instead of relying on your current balance is just one way to keep your finances in order. Another way is always to make sure you have some backup cash in your savings account. That way, if you ever accidentally overdraw your bank account, you can quickly transfer funds from your savings to your checking. Often, a bank or financial institution will not charge overdraft fees if funds are replaced in an overdrawn account within twenty-four hours. You may also sign up for overdraft protection. Overdraft protection is a security system where funds are automatically deducted from your savings or alternative account in the event you ever overspend from your primary account.
Remember, if you ever need extra money deposited in your account to cover an accidental overdraw, you might want to look into poor credit monthly installment loans. With these kinds of loans, you may be approved for hundreds or thousands of dollars in just a few minutes, even if you have bad or no credit.
While your current and available balance may be identical at times, it is still essential to know how they vary. You can find other helpful information and tips about organizing your finances on the CreditNinja blog!