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).

  1. Check Hold

    A check hold denotes the maximum number of days that a bank can ...
  2. Book Balance

    Book balance is a term used to describe money available after ...
  3. Checking Account

    A checking account is a deposit account at a financial institution ...
  4. Cleared Funds

    Cleared funds are the balance in an account that is able to be ...
  5. Automatic Transfer Service (ATS)

    An automatic transfer service (ATS) is a banking service that ...
  6. Positive Pay

    Positive pay is a banking service used to match the checks a ...
Related Articles
  1. Personal Finance

    Top 5 Reasons Banks Won't Cash Your Check

    Learn the top reasons that a bank won't cash your check, and find out what steps you can take to prevent those scenarios from happening.
  2. Personal Finance

    10 Bank Promotions That Pay You To Open An Account

    Find out which banks are running cash promotions this summer.
  3. Financial Advisor

    Is A Premium Checking Account Worth It?

    Premium checking accounts give you free checking and other perks in return for keeping a certain balance in the bank. Is that the best use of your money?
  4. Managing Wealth

    Checking Account Reviews: Chase Premium Platinum

    Which perks and services come with Premier Platinum and is it worth the cost to you?
  5. Personal Finance

    10 Checking Accounts the Ultra Rich Use

    These accounts – created specifically for the wealthy – come with special extras such as personal bankers, waived fees and the option of placing trades.
  6. Personal Finance

    Where to Put Your Cash: Call Deposit vs. Time Deposit Accounts

    Time deposit accounts and call deposit accounts allow customers to earn higher interest in exchange for less access to their cash.
  7. Personal Finance

    The Most Costly Banking Mistakes You Can Make

    With changing and increasing fees, it can be difficult to avoid bank charges, but investing time in finding out what your bank charges, and when, can help you save money.
  8. Managing Wealth

    Review: Discover Checking Account

    Will having a Discover checking account save you money? It will save you fees.
  1. How long does it take a check to clear?

    It usually takes two days for a check to clear, but in some cases it may take longer. Discover how banks treat large deposits ... Read Answer >>
  2. When do checks expire?

    There is a legal grace period for cashing checks, but depositors and issuers may risk overdraft fees if a late check is presented ... Read Answer >>
  3. The Difference Between Term Deposit and Demand Deposit

    Understand the meaning of demand deposits and term deposits, and learn about the major differences between the two. Read Answer >>
  4. How liquid are money market accounts?

    Understand the characteristics that distinguish money market accounts from checking, savings account and money market funds ... Read Answer >>
Trading Center