What Is an Available Balance?

The available balance is the balance in checking or on-demand accounts that is free for use by the customer or account holder. These are funds that are available for immediate use, and includes deposits, withdrawals, transfers, and any other activity that has already cleared to or from the account. A credit card account's available balance is normally referred to as available credit.

An account holder's available balance may be different from the current balance. The current balance generally includes any pending transactions that haven't been cleared.

The available balance is different from the current balance, which includes any pending transactions.

Understanding Available Balance

As noted above, the available balance represents the funds available for immediate use in a customer's account. This balance is updated continuously throughout the day. Any activity that takes place in the account—whether that's a transaction done through the teller, an automated teller machine (ATM), at a store, or online—affects this balance. It does not include any pending transactions that have yet to clear.

When you log into your online banking portal, you will normally see two balances at the top: The available balance and the current balance. The current balance is what you have in your account all the time. This figure includes any transactions that have not cleared such as checks.

Depending on both the issuing bank and the receiving bank’s policies, check deposits may take anywhere from one to two days to clear. This process may take much longer if the check is drawn on a non-bank or foreign institution. The time between when a check is deposited and when it is available is often called the float time.

A customer's available balance becomes important when there is a delay in crediting funds to an account. If an issuing bank has not cleared a check deposit, for example, the funds will not be available to the account holder, even though they may show up in the account’s current balance.

Using the Available Balance

Customers can use the available balance in any way they choose, as long as they don't exceed the limit. They should also take into consideration any pending transactions that haven't been added or deducted from the balance. A customer may be able to withdraw funds, write checks, do a transfer, or even make purchase with their debit card up to the available balance.

For example, your bank account balance may be $1,500, but your available balance may only be $1,000. That extra $500 may be due to a pending transfer to another account for $350, an online purchase you made for $100, a check you deposited for $400 that hasn't cleared yet because the bank put it on hold, and a pre-authorized payment for your car insurance for $450. You can use any amount up to $1,000 without incurring any extra fees or charges from your bank. If you go beyond that, you may go into overdraft, and there may be issues with the pending transactions.

Key Takeaways

  • The available balance is the balance available for immediate use in a customer's account.
  • This balance includes any withdrawals, transfers, checks, or any other activity that has already been cleared by the financial institution.
  • The available balance is different from the current balance which accounts for all pending transactions.
  • Customers can use any or all of the available balance as long as they don't exceed it.

Available Balance and Check Holds

Banks may decide to place holds on checks under the following circumstances, which affect your available balance:

  • If the check is above $5,000, the bank can place a hold on whatever amount exceeds $5,000. However, said amount must be made available within a reasonable time, usually two to five business days.
  • Banks may hold checks from accounts that are repeatedly overdrawn. This includes accounts with a negative balance on six or more banking days in the most recent six-month period and account balances that were negative by $5,000 or more two times in the most recent six-month period.
  • If a bank has reasonable cause to doubt the collectibility of a check, it can place a hold. This can occur in some instances of postdated checks, checks dated six (or more) months prior, and checks that the paying institution deemed it will not honor. Banks must provide notice to customers of doubtful collectibility.
  • A bank may hold checks deposited during emergency conditions, such as natural disasters, communications malfunctions, or acts of terrorism. A bank may hold such checks until conditions permit it to provide the available funds.
  • Banks may hold deposits into the accounts of new customers, who are defined as those who have held their accounts for less than 30 days. Banks may choose an availability schedule for new customers.

Banks may not hold cash or electronic payments, along with the first $5,000 of traditional checks that are not in question. On July 1, 2018, new amendments to Regulation CC—Availability of Funds and Collection of Checks—issued by the Federal Reserve took effect to address the new environment of electronic check collection and processing systems, including rules about remote deposit capture and warranties for electronic checks and electronic returned checks.

Special Considerations

There are cases that can affect your account balance—both negatively and positively—and how you can use it. Electronic banking makes our lives easier, allowing us to schedule payments and allow for direct deposits at regular intervals. Remember to keep track of all your pre-authorized payments—especially if you have multiple payments coming out at different times every month. And if your employer offers direct deposit, take advantage of it. Not only does it save you a trip to the bank every pay day, it also means you can use your pay right away.