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Understanding the Current Balance vs Available Balance in Your Account

It can happen to even the most diligent of budget watchers – an overdraft on your bank account. According to statistics, nearly 20 percent of Americans incurred an overdraft over the past year. This leaves many people wondering, "What does it really mean when I check my account balance?"

One of the major sticking points for people can be the current balance versus available balance of bank accounts. As more people move to online banking from the days of manually balancing a checkbook, this difference can be critical in how much money you have at your disposal.

Your local, customer friendly credit union and most banks do offer overdraft protection as a back up plan in case you make a mistake in your balancing. However, it's important to understand the differences between current balance and available balance and how that can affect your spending and planning.

What does current balance mean in my account?

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When you look at your bank account online or speak with a branch teller, the current balance is the total amount of money kept in the account. As you will learn soon, this may not be the most accurate picture of your account's status.

What does available balance mean?

Your available balance is the amount of money in your account, minus any credits or debts that have not fully posted to the account yet. This is the amount of money you can spend, but it may fully reflect the money you have at your disposal.

Why are my current balance and available balance different?

You may notice upon checking your account balance that these two numbers are not the same. If you've made recent purchases with your debit card, but the financial institution hasn't fully processed the transaction, the current balance will be higher than the available balance. This is also the case if you have written a check that has not yet cleared.

Can I spend my current balance?

You can, but you have to be mindful about other financial transactions you have made. Your current balance reflects all your money, in addition to funds that are being held or are in transit, such as checks.

To use an example, let's say you both your current and available balance are at $100. You use $10 to buy coffee in the morning. Your current balance would still say $100 since the transaction at the coffee shop is still pending. But your available balance would be $90. So, if you also had a check that you mailed that was for $100 and it cleared, you would be overdrawn by $10. More than $11 billion in overdraft fees were paid in 2019 – you don't want to add to that number if you can help it.

You should keep an eye on your available balance if you have recurring payments or a large purchase to make, as that is the balance most affected by new transactions.

Do pending transactions show in the current balance?

No, your pending purchases do not appear in the current balance. That total is the sum of all cleared and posted transactions. So any purchases you've made in the last day or two (or longer depending on the day of the week and the timeframe in which your financial institution processes its transactions) will not show in the current balance. Your available balance is the more accurate snapshot of how much money you have in the account since it does reflect pending transactions.

Why is my available balance more than my current balance?

There are a couple of explanations for this occurrence. One is that you may have recently deposited a check, either via an ATM or mobile deposit. Some financial institutions will add the deposit to your available balance but will not add it to the current balance until they verify the check is good and receives funds from the issuing bank.

The other reason could be that you have an overdraft protection line of credit from your financial institution. Some banks and credit unions offer this service to give customers a little wiggle room if there is an accidental overdraft, but remember, this is a loan and will need to be repaid if used.

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