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 in which 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, such as withdrawals or transfers.
BREAKING DOWN Available Balance
Depending on both the issuing bank and the receiving bank’s policies, check deposits may take anywhere from one to two 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 holds on checks under the following circumstances.
If the check being deposited 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.
If a check is being redeposited, it may be held for a reasonable period of time. However, if a customer returns the check, say due to a missing endorsement or because the check was postdated, after the bank corrects the deficiency it may not hold said check any longer.
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 put a hold on it. 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 (next-day items). 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 (depositing paper checks remotely) and warranties for electronic checks and electronic returned checks.