What Is an Account Balance?

An account balance is the amount of money present in a financial repository, such as a savings or checking account, at any given moment. The account balance is always the net amount after factoring in all debits and credits. An account balance that falls below zero represents a net debt—for example, when there is an overdraft on a checking account.

Key Takeaways

  • An account balance represents the available funds, or current account value, of a particular financial account, such as a checking, savings, or investment account.
  • Financial institutions make available the current value of account balances on paper statements as well as online resources.
  • Account balances in investments holding risky assets may change considerably throughout the day.
  • A negative account balance indicates a net debt.
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Account Balance

Understanding Account Balances

An account balance shows an individual's total assets less total liabilities. Sometimes, this can be referred to as an individual's net worth or total wealth because it subtracts any debts or obligations from positive sums. For specific accounts at a financial institution, such as a checking account or brokerage account, the account balance will reflect the current sum of funds or value of that account. For investments or other risky assets, the account balance will tend to change over time as security prices rise and fall in the market.

An account balance can also refer to the total amount of money owed to a third party, such as a credit card company, utility company, mortgage banker, or another type of lender or creditor. For example, a person may have made various purchases of $100, $50, and $25 on their credit card, and returned another item costing $10. The account balance includes the purchases he made, which total $175, but also the item he returned for $10. The net of the debits and credits is $165, or $175 minus $10, and that amount is the account balance.

Finding Your Account Balances

In banking, the account balance is the amount of money an individual has available in his checking or savings account. The account balance is the net amount available to the person after all deposits and credits have been balanced with any charges or debits. Sometimes an account balance does not reflect the most accurate representation of an individual's available funds, due to pending transactions or checks that have not been processed.

For example, if a starting checking account balance is $500, and the account holder received a check for $1,500, and also wrote a check or scheduled an automatic payment for $750, then his account balance might show $2,000 immediately, depending on the banking establishment. However, the true account balance is $1,250. It is important to keep track of account balances by recording every credit or debit to ensure the most accurate picture of the account.

Many other financial accounts also have an account balance. Everything from a utility bill to a mortgage account needs to have an account balance to show an individual consumer the balance of his account. For financial accounts that have recurring bills, such as a water bill, the account balance usually shows the amount owed.

Account Balance vs. Available Credit

For credit cards, account balances are the total amount of debt owed at the start of the statement date. The account balance on a credit card also includes any debt rolled over from previous months, which may have accrued interest charges. Available credit is the term used alongside the account balance to indicate how much of the credit line the account holder has left to spend.

For some bank accounts, deposits may not clear in whole or in part immediately and may take up to a few business days to show up in your account. In such situations, the bank will usually indicate to you the current available balance alongside the unavailable amount that is waiting to clear.