The available balance is the balance of checking or on-demand accounts that can be used at no cost by the account owner. They are immediately available funds, including withdrawals, deposits transfer, and other transactions that have been paid for or transferred to the account. The credit card's available balance is typically called an available credit. The balance of the account holder could be different from its current balance. The current balance typically comprises the pending transactions that haven't cleared.
Understanding Available Balance
As mentioned in the previous paragraph, the available balance is the amount of money readily available to use immediately on a customer's account. This balance is continuously updated all day. Every activity within the account, whether a transaction made through the ATM, at the store, or online, affects the balance. This does not include outstanding transactions that are yet to be cleared.
If you sign in to your online banking portal, you'll typically notice two balances in the upper right-hand corner: The current amount and current balance. The current balance represents what is in your account throughout the day. This number includes any transactions that haven't cleared, like checks.
With the issuer bank's and recipient bank's policies, check deposits could take one to two days to be cleared. The process could take longer if the cheque were drawn from a non-bank or foreign institution. The period between when the check is made and when it becomes accessible is usually referred to as the floating time.
The balance of a customer's account becomes crucial when there are delays in crediting the account with funds. If the issuing bank hasn't approved a deposit for a check, for instance, the money won't be accessible for the account owner even though it could be in the account's current balance.
Using the Available Balance
Customers can use their available balance however they like, so the balance doesn't exceed the limit. It is also important to be aware of any outstanding transactions that haven't been credited or removed from the balance. The customer might be able to cash out funds or write checks, make transfers, or purchase something using their debit card to their available balance. For instance, your account balance may be $1500; however, your balance could be only $1,000.
This extra $500 might arise from waiting for a transfer to a different account for $350, the purchase with $100, or a cash check that you put in for $400 but which isn't yet cleared because the bank placed the deposit on hold or an authorized payment to cover your car insurance costs $450. You can use any amount up to $1,000 without having to pay additional charges or fees from your financial institution. If you exceed that limit, you could go into an overdraft and face issues due to the ongoing transactions.
Current Balance vs. Available Balance
The current balance is the unpaid balance of the funds in the account of a bank holder. The balance is determined after all withdrawals, deposits, bank charges, and other transactions in banking are documented and recorded in the account. The balance that is available, on the other side, is the sum that isn't earmarked or kept for a specific use. It's the balance at hand that can be withdrawn at the moment. It is determined by every withdrawal and deposit and all pending electronic transactions, regardless of whether they've been credited or debited to the account. In general, any amount that exceeds the available balance is considered an overdraft, even if it's in the account's current balance. Overdrafts and penalties are determined by the bank using the balance.
Practical Example
Let the balance at present and the current balance of Tim's account equal $50. Imagine that Tim buys a shirt for $30 in a retail store using a credit card. The seller may have Tim's bank preauthorize the purchase. The bank will then place the account of Tim for $30. Since this debit card purchase has not yet been posted into his bank account, the balance would be $50; however, the balance available will be only $20. If the seller can submit the transaction to pay, the bank will transfer the transaction to Tim's account, following which his current balance will be decreased to $20.
Special Considerations
There are a variety of situations that could alter your account balance, both positively and negatively, and how you can utilize it. Electronic banking can make our lives much easier by permitting us to plan payments and allow frequent deposits. Keep track of your pre-authorized transactions, particularly if you have multiple installments due at various times each month. If your employer provides direct deposit, make use of it. It's not just saving you the hassle of going to the bank each payday; it also means you can access your payment immediately.
