Available Balance

Image: Moneybestpal.com

The phrase "available balance" refers to the sum of money that a client may use or withdraw at any moment from their bank account. It differs from the account's current balance, which represents all of the money in the account, including any unpaid outstanding transactions. 

In order to manage one's personal finances and stay clear of overdraft penalties or running out of money, it's critical to understand the differences between these two amounts.

What is the Available Balance?

The available balance is the total amount that has been cleared for deposits or transfers to the account after all deductions and withdrawals have been processed. It is sometimes referred to as the cleared balance or the ledger balance. The transactions that have been processed and verified by the bank, such as debit card purchases, ATM withdrawals, cheques, internet transfers, direct deposits, and bill payments, are reflected in the available balance. Any pending transactions that have not yet cleared, such as checks that have been deposited but not validated, debit card purchases that have not been posted by the merchant, or unfinished online transfers, are not included in the available balance.

The amount a customer has in their account that they can use or withdraw without being charged a fee or facing any other consequences is known as the available balance. Overdraft costs, insufficient funds fees, rejected checks or refused transactions could apply to the consumer if they attempt to utilize more money than they have available. So it's a good idea to check your balance before making any purchases and to keep a record of your earnings and expenses.

What is the Current Balance?

The available balance is the amount you can actually access and utilize from the account, as opposed to the current balance, which is the entire amount of money in the account. The account balance or statement balance are other names for it. The transactions that have been cleared and those that are still pending are both included in the current balance. Pending transactions are ones that the bank or the merchant has started but not yet completed. Examples include checks that have been written but not cashed, debit card purchases that have been authorized but not yet posted, and online transfers that have been requested but not yet carried out.

Depending on if there are additional pending deposits or withdrawals, the current balance could be either higher or lower than the available balance. A customer's balance will remain at $500 until the beneficiary cashes the check, for instance, if they have $500 in their account and write a check for $100. However, after deducting the check amount, their available balance will be $400. In contrast, if a consumer deposits a check for $100 and already has $500 in their account, their current balance will be $600 until the check clears. However, since the check amount won't be available, their available balance will still be $500.

Although it is helpful to know how much money is in an account at any particular time, the current balance does not reflect how much can be used or withdrawn. As pending transactions are added or cleared during the day, the current balance may fluctuate. As a result, it's crucial to constantly check your current balance and compare it to your available balance.

Why are Available Balance and Current Balance Important?

The key to managing one's personal finances and avoiding pointless fees or penalties is to be aware of one's available balance and current balance. Here are some reasons why these two balances are important:

• To avoid overdraft fees: When a customer attempts to remove more money from their account than what is available, overdraft fees are assessed. The typical overdraft fee in 2020 was $33.47, according to CNBC. Customers should check their available balance before completing any transactions and preserve a reserve of funds in their accounts to prevent incurring overdraft penalties.
• To avoid insufficient funds fees: If a customer attempts to make a payment using a check or an electronic transfer that exceeds their available balance, insufficient funds fines will be assessed. Insufficient funds fees typically cost $32.59 in 2020, according to ValuePenguin. Customers should make sure they have enough money to cover any checks or transfers before writing them in order to avoid incurring insufficient funds fees.
• To avoid bounced checks: Checks that are returned by the bank because there are not enough funds in the customer's account are known as bounced checks. Checks that bounce can harm a person's credit report and reputation in addition to incurring fines from the bank and the check's recipient. Customers should verify their available balance before writing any checks to make sure they have enough money to cover them in order to prevent bounced checks.
• To avoid declined transactions: Transactions that are declined by the bank or the merchant because there is not enough money in the customer's account are known as declined transactions. Transaction rejections can result in a customer's inconvenience and shame as well as the potential loss of goods or services. Before making any purchases or payments, clients should verify their available balance to make sure they have enough money to finish them. This will help prevent denied transactions.
  

How to Check the Available Balance and Current Balance?

Customers can check their available balance and current balances in various ways, such as:

• Online banking: Customers can access their account summary, which displays both the available balance and the current balance of their account, by logging into their online banking interface. The information about the cleared and ongoing transactions that have an impact on their balances is detailed in their transaction history, which they can also examine.
• Mobile banking: Customers can examine their account summary, which will display both the available balance and the current balance of their account, using their mobile devices to access their online banking portal or download their bank's app. The information about the cleared and ongoing transactions that have an impact on their balances is detailed in their transaction history, which they can also examine.
• ATM: Customers can access an ATM with their debit card and PIN and check their account balance, which will typically display the available balance of their account, by using the ATM. Additionally, a mini-statement that displays the most recent transactions that have an impact on their balance is available for printing.
• Phone banking: Customers can use their account number and PIN to obtain their account information by calling the customer service number of their bank. This information often includes the available balance and the actual balance of the customer's account. Additionally, they have the option of requesting a statement, which will provide information on all cleared and pending transactions that have an impact on their balances.
• Branch: Customers can check their account balance at the branch of their bank using their debit card or passbook, which typically displays both the available balance and the current balance of the account. Additionally, they can request a statement, which will contain information about the cleared and outstanding transactions that have an impact on their balances.
  

How to Manage Available Balance and Current Balance?

Customers can manage their available balance and current balance effectively by following some best practices, such as:

• Keeping track of one's spending and income: All transactions, including debit card purchases, ATM withdrawals, cheques, internet transfers, direct deposits, and bill payments, should be documented by customers. Additionally, they should routinely examine their records and bank statements, and they should notify their bank as soon as they find any anomalies or inaccuracies.
• Setting up alerts and notifications: Customers should set up low balance alerts, overdraft alerts, deposit alerts, withdrawal alerts, and other alerts and notifications through their bank or through third-party apps that will notify them of any changes in their account balance. They will be able to stay on top of their finances and prevent any fees or penalties thanks to these alerts and notifications.
• Using budgeting tools: In order to plan and manage their income and expenses, create financial objectives, and track their success, customers should use budgeting tools like spreadsheets, apps, or software. These resources will support their prudent money management and future savings.
• Building an emergency fund: Customers should create an emergency fund that will at least cover three to six months' worth of living expenditures in case of any unforeseen circumstances or emergencies, such as job loss, medical expenses, automobile repairs, etc. This fund needs to be stored in a different savings account that is easily accessible but is not connected to the primary checking account. One's available balance and current balance will be cushioned by this fund, preventing any stress or hardship due to money.
  

Conclusion

Customers should be familiar with and comprehend the words available balance and current balance while managing their personal finances. The difference between available balance and current balance is that the former refers to the amount of money that a client can use or take from their account at any moment, whilst the latter refers to the entire amount in the account, including any outstanding transactions that have not yet cleared. Customers should routinely check both balances, adhere to basic best practices, and avoid any fines or penalties so they may reach their financial objectives.