Understanding the Available Balance in Your Bank Account
When you check your bank account balance, you may find that you have several balances, including an "available" balance. It's not just the names that are different: The amounts of these balances can differ, too. So what are available funds and why is your available balance sometimes lower than your account balance?
Your available balance is the amount you can spend right now. You can think of it as "funds available to withdraw," but there are several ways to actually use the money.
- Withdraw cash: You can take that amount out of your account in cash, either at an ATM or with a bank teller. If you use a credit union that participates in shared branching, you can even withdraw cash at other credit unions nationwide.
- Spend with your debit card: Your debit card pulls from your checking account, so you can only use it if you have funds available. Swipe or insert your card at a card reader, or make purchases online with your card.
- Write a check: Checks are also funded from your checking account. When you write a check, you should assume that the funds are no longer available—even if your bank says you still have that money. That's because it can take several business days (or longer, if your payee waits to deposit the check) for that transaction to appear in your account. This is something you need to track for yourself, and that’s easiest if you use a check register or balance your account regularly.
- Pay a bill: Available funds can be used for online bill payment, whether you create the payment from your bank or your biller asks your bank for the money. If your billers pull from your account automatically, be sure to keep enough money on hand.
Not Yet Available
Sometimes you’ll see an available balance that’s lower than your account balance. In those cases, you can only spend your available balance (or less if you have outstanding checks), and the rest of the money is being held by your bank.
There are generally two reasons for a low available balance:
- Deposits to your account have not cleared yet.
- There are pending withdrawals or authorizations against your account.
Deposits: When you deposit funds into your account, your bank might not allow you to use the money immediately. They don’t know whether the payment is legitimate, and the money takes several days to transfer. You can generally use up to $200 by the next business day, and some banks let you use your money more quickly—especially if you’re a longtime account holder with no history of depositing bad checks. Government-issued checks such as tax refunds also might be available quickly. However, others, such as personal checks and checks from overseas, are riskier and banks take longer to release those funds. Banks will even hold cashier's checks for a few extra days in some cases.
Although this can be inconvenient, these holds can protect you. If a check bounces, you're responsible for the funds. So if you spend the money from a bad check, you'll have to replace those funds in your bank account (plus pay fees to your bank). Also, you could end up bouncing checks of your own and racking up fees as a result. Not giving access to this money right away allows your bank a chance to make sure the check was good. If you ever have any doubt about a check, wait a while before you spend the money.
Pending withdrawals and authorizations: If you scheduled an upcoming payment through your bank's online bill pay feature, those funds will be unavailable to you because the bank knows that the money is already spoken for. The same is true when you swipe your debit card: The bank knows that you intend to spend some money. Debit cards, however, can be especially troublesome; sometimes merchants authorize more than you're going to spend, and they can lock up your entire balance (this happens most often at gas stations, rental car agencies, and hotels). Some places simply authorize $100 or more every time you swipe your card, and that money can be tied up for several business days until the hold is released.
Even if you can't spend your money immediately, it is helpful to know how much you have (or had) and how much is potentially available once all of those holds go away. So your bank provides other balances for you as well.
If you want to double-check your bank's math, you can always balance your account yourself. In addition to helping you catch mistakes, it’s also a good way to track your spending and catch any identity theft before it gets out of hand. (You’re often protected from errors and fraud, but you need to act quickly to get the full protection available under federal law.)
Avoiding Cash Crunches
For the most part, you depend on your bank to release funds. However, there are ways to reduce the chances of your account running dry.
- Direct deposit: Receiving your paychecks this way gets money into your account quickly. If your employer still pays you with a paper check, sign up for electronic payments so that the money goes directly from your employer’s bank account to yours. That way you don’t need to wait on the check (especially if it goes through the mail), and you don’t need to go to the trouble of depositing it, either. As a bonus, the money might even hit your account a day or two before the checks are printed, and some banks offer same-day availability for those payments.
- Cash buffer: Keeping a cushion in your account can protect you from unexpected expenses and delays. A small cash buffer can help you avoid problems if a payment doesn't clear when you think it will, or your bank puts a larger-than-expected hold on your funds. If you can't manage a buffer, look into overdraft protection, but only sign up if you’re going to use it as a safety net—don’t make a habit out of paying overdraft fees. Use a less expensive overdraft line of credit if possible.
Consumer Financial Protection Bureau. "How Quickly Can I Get Money After I Deposit a Check Into My Checking Account? What Is a Deposit Hold?" Accessed April 1, 2020.
Navy Federal. "Free EveryDay CheckingAccount Fees and Terms." Accessed April 1, 2020.
One United Bank. "BankBlack Early Pay." Accessed April 1, 2020.