By logging into your online banking, you can check the transaction history, including deposits and withdrawals. In addition, we observe the available funds and check the so-called balance .
Contrary to appearances, their size can vary significantly and lead to a serious mistake that will determine our further expenses. What exactly is the balance, how is it different from the available funds, and why should these two values be distinguished from each other?
Before we get to the balance, you need to realize one crucial thing. The bank does not post outgoing and incoming transfers 24 hours a day, 7 days a week. Sessions in which postings are made can be really different and determined individually by the banks.
For example, Honest Bank begins its first booking of payments after 9:00 and ends after 17:00. This means that any transfers outgoing after this time can be credited to our account only the next business day. So what is happening to them during this time? They are in suspension, a vacuum, a kind of blockade. The bank spins them, but neither you nor your recipient has the money.
What is the account balance?
The account balance is the balance including all transfers – including blockades, suspension cash and transactions not debited from the account. This means that the balance often misleads us when talking about the amount that has long been changed. The opposite is the means available. The distinction between these two issues is extremely important because in this way we do not use the money we no longer have, thus not exposing ourselves to debts or a negative balance.
Account balance and available funds
The balance is the total number of all transactions, even those that we no longer have physically on the account. The available funds are real and actual amounts that we are able to use in any way. So it is often the case that the balance is higher than the funds available on the account.
So what should you pay attention to?
To find out our real financial situation, plan further expenses, or analyze the possibilities, we look at the available funds. Of course, after removing the blockades, our balance will equal the available funds, which will be a great help for us.
To better understand this mechanism, let’s take an example:
We have 2,000 USD available funds and balances. On Friday, after work, we decide to make a USD 500 transfer for the flat. We make a transfer. Due to the fact that it is after 18:00 and our bank has finished posting outgoing transactions, our balance remains unchanged. They still have USD 2,000 on them. Most likely, its size will change after the next posting – i.e. on Monday morning. Available funds, however, change, because the real amount has already left our account. So we don’t have money physically, they are in so-called lock. Therefore, it can be concluded that the account balance is available funds + locks, waiting to be credited.
Why is the account balance important?
The account balance is important to remind you of the amount of transactions awaiting approval and informing you of a continuous, unchanged block. In this way, it is easy to record and “catch” transfers that for some reason did not go further. Nevertheless, when planning expenses, it is better to observe the changing available resources. They will not mislead us regarding the final amount that can be spent.