Mind the Gap: Understanding the Difference Between Your Current and Available Fund Balance

03 November 2017

Have you ever logged into your online banking portal only to wonder why there are two separate, and often differing, balances listed within your various bank accounts? You may have pondered over why you have a ‘current’ and ‘available’ balance listed there; aren’t they the same thing?

The simple answer is no, they most certainly aren’t the same thing, and if the two balances don’t reflect the same value, you should be aware of what that means and the implications thereof.

Let’s start by defining what exactly these two balances are.

Your current balance is the sum of money that you have in your account at the start of the current business day and doesn’t reflect any pending payments, deposits, withdrawals or other uncleared transactions.

Your available balance, on the other hand, is your current balance minus pending payments, withdrawals, debit orders, deposits or anything else that may not have cleared as yet.

Based on these definitions, we can see that although the difference is quite subtle, these balances are not the same thing. It will usually be the case that your current balance is higher than your available balance and this can stress some people out, as they wonder where the discrepancy is coming from.

To understand this more effectively, let’s look at a simple example:

Let’s say you treat yourself to lunch at your local café, you deserve it after all! You have a fantastic meal and before leaving the waiter brings you a point-of-sale card machine, and you pay your bill of R150 using your debit card. Now this amount will immediately be ‘reserved’ from your available pool of funds in your cheque account until it has been cleared and approved. So if you had R10 000 in your cheque account, your current balance would remain unchanged at R10 000, but your available balance will reflect your original funds (current balance) minus the pending payment amount and show your available balance as R9 850. The amount of time it takes for this discrepancy to be resolved depends on a number of factors that can include the bank the restaurant uses, whether their card machine transactions are processed automatically, how often said transactions are processed, etc. But once the payment is fully approved and cleared, your current and available balance will once again level out and relfect your new balance of R9 850.

Once you understand this simple logic, it actually makes a lot of sense and can help you keep control of your spending. It’s a good idea to always use your available balance, rather than your current balance as the true indication of your available funds to ensure you’re not spending more than you have.

Spend wisely and prosper!

Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.