Whenever you’re budgeting out your money, it’s important to understand how much money you have at any given time, but not all bank balances are equal. Making a mistake between your current and available balance, for example, could cause you problems as you spend. Your current bank balance is the total of all posted transactions as of the previous day while your available balance includes pending or posted transactions for today. For help managing your wealth and all your finances, consider working with a financial advisor.
What Is Current Balance?
The current balance is all the money that is in your bank account right now. This balance might include pending transactions, like a credit card payment or a check that hasn’t cleared.
If there hasn’t been any activity on your account in at least a week, your current balance might be the same as your available balance. But if there has been recent activity on your account, the amount of money you’re able to spend might be different from your current balance.
For example, suppose your current balance is $500, so you go ahead and make your $350 car payment. However, you forgot that you made a $200 credit card payment yesterday that is still processing. Unless you have another deposit that clears in the meantime, your account could be overdrawn by $50. Depending on your bank, that may result in an overdraft fee or NSF fee.
What Is Available Balance?
Available balance is your current balance with any pending transactions or holds included. Thus, there are many reasons your available balance might be different than your current balance. A deposit, a check you’ve written or a payment with your debit card are some examples of pending transactions that might cause these discrepancies.
For example, suppose you spent $150 at the grocery store and paid with your debit card.
Or maybe you asked for a refund on something you purchased and the refund is still processing. All these transactions could cause your available balance to be less than or more than your current balance. That’s why it’s important to check both before making a purchase.
Difference Between Current Balance and Available Balance
The difference between the current balance and the available balance is small but important. Available balance is how much money you are able to spend right now, including any pending transactions. Meanwhile, the current balance shows how much money is in your account without subtracting pending payments or withdrawals. Current balance can be useful in some situations, like when doing your monthly budgeting. However, it can be less useful for monitoring your daily spending.
Imagine you spend money frequently by writing checks or swiping your debit card. In this case, you might find that your available balance tends to be lower. But if you have a large deposit like a paycheck that is pending, your current balance could be lower. If a large deposit is pending for more than a few business days, it might be worth contacting your bank. That money won’t be part of your available balance until it clears, meaning you won’t be able to spend it.
Which Balance Is More Reliable?
Generally, one balance will not be better or more reliable than the other. Instead, each gives you different information about your bank account balance. However, there might be situations where you prefer one balance over the other.
For instance, you might refer to your available balance if you have a large bill due in the next day or two, like a rent or car payment. This will show you how much you can safely spend at any given moment. If you refer to your current balance instead, you might increase your risk of overdrawing your account. That’s especially true if you are already cutting it close based on your current balance. If you have many pending payments, the risk can be even greater.
How to Avoid Overdraft Fees
No one likes overdraft fees, but it’s possible to avoid them with basic precautions. One of the simplest ways to avoid overdraft fees is by keeping extra cash on hand. This way, you’ll be less likely to overdraw your account, even if you forget about a pending payment or an upcoming automatic bill payment. Keeping extra cash on hand can also help when you have an unexpected expense.
If you are living paycheck to paycheck, you can consider overdraft protection, which will at least prevent payments from failing. But banks often charge significant fees for this protection, so check your bank’s fees. In many cases, overdraft fees can be more than $30 for each overdraft.
The Bottom Line
Current and available balances both give you a snapshot of the money you have in your bank account. However, only your available balance includes pending transactions. While the current balance can be useful for monthly budgeting, the available balance is often better for monitoring daily spending. Keeping an eye on your available balance will help you avoid overdraft or NSF fees. It might also prove useful to keep extra cash on hand to avoid spending more than you have.
Tips for Opening a Bank Account
- A financial advisor can help you work through your banking needs and put together a plan that works for your unique situation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- The best bank accounts are away with costly fees, like overdraft fees. See SmartAsset’s list of the best checking accounts to find one that’s right for you.
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