DEFINITION of 'Available Balance'

The available balance is the balance in checking or on-demand accounts that the customer is free to use. Available balance becomes important in situations wherein 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 stated total funds.

Essentially, the account balance may be different from the balance that is effectively available to the account holder for transactions like withdrawal or transfer.

BREAKING DOWN 'Available Balance'

Depending on both the issuing bank and the receiving bank's policies, check deposits may take anywhere from two to five days to clear if both banks are domestic. 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 float time.

Available Balance and Check Holds

Banks may currently decide to place six types of holds on checks:

  1. Any amount exceeding a $5,000 deposit. This “remainder” after $5,000 must be made available within a reasonable time, usually 2-5 business days.

  2. Re-deposited checks may be held for a reasonable period of time; however, if a customer returns the check, due to a missing endorsement or because the check was postdated, after the bank corrects the deficiency, they may not hold said check any longer.

  3. 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, or account balances that were negative by $5,000 or more two times in the most recent six month period.

  4. If a bank has reasonable cause to doubt the collectibility of a check. 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.

  5. A bank may hold checks deposited during emergency conditions (i.e. natural disasters or communications malfunctions). A bank may hold such checks until conditions permit them to provide the available funds.

  6. Banks may hold deposits into accounts of new customers. New customers are defined as those who have opened 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 (next-day items).

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