Actual vs Available Balances: What’s the Difference?
They aren't the same and knowing what each means can be the difference between getting an overdraft fee or not.
Before we dive into the differences between Actual and Available bank balances we should talk about how modern banking works.
Banks are like car dealerships. On any given day there are cars sitting at the lot - these cars represent your Actual Balance. From the outside, all the cars look like they count towards your Balance; but in reality, some cars on the lot have already been sold to other people while others have yet to arrive from the factory. The number of cars that are actually available for sale on the lot represents your Available Balance.
TLDR
Actual - The amount of funds showing in your account without considering incoming or outgoing funds that might be in transit.
Available - The funds that are not already allocated to an expense, have settled into your account and can be spent.
Why is it important to know the difference between Actual and Available Balances?
The importance of keeping tabs on both your Actual and Available Balances is the prevention of overdrafts (which can be very expensive).
For example, you’re about to go shopping with your friends, and you check your account balances before you head out so that you have a sense of how much you can spend on a new jacket. Your balances look like this:
Actual: $500
Available: $315
Yesterday was payday, and you deposited your check for $185 directly into your checking account as preparation for your big shopping trip. Your balance quickly reflects the new funds and says that your Actual Balance is $500.
You find a jacket that you really want, and it's $375. The trick here is that even though one of the numbers you see in relation to your account states "$500," in reality, all of those funds aren't available for use just yet. Your current Available Balance is what you can safely spend. So, if you were to go buy the jacket right now on your debit card, one of two things will happen:
- If you have Overdraft Protection, your bank will authorize the charge, overdraw your account and then charge you an overdraft fee.
- If you do not have Overdraft Protection enabled, your bank will fail the transaction, and you won’t be able to buy the jacket.
If you instead waited an additional day (settlement times for deposits are based on the bank, size of deposit and time of deposit) your Actual Balance and Available Balance would likely both be $500, and that same purchase would go through without a problem.
Keep track of both your Available and Actual Balances at all times using smart Balance Notifications to avoid unnecessary fees, and if you want to keep track of all of your accounts in one place, check out the Astra mobile application - available for both iOS and Android platforms.