Available Balance

What Is an Available Balance?

An available balance is the amount of money in a financial account that the holder can actually use right now. It is usually lower than the total recorded in the account, because it leaves out funds that are reserved, not yet cleared or otherwise restricted. Banks, brokerages and payment platforms all report some version of this figure, though the exact rules differ from one institution to another.

How It Is Determined

The starting point is usually the current balance, which reflects all posted transactions. The institution then subtracts amounts it will not yet release. These commonly include:

• Holds placed on recently deposited checks that have not cleared
• Card authorizations that have not yet posted
• Funds set aside for a pending transaction or scheduled payment

The calculation can be summarized as:

Available Balance = Current Balance - Holds and Restrictions

An Example

Suppose an account shows a current balance of 1,000 dollars, and 300 dollars of that is a deposited check still on hold. A card authorization for 150 dollars has also been made but has not posted. The available balance is 550 dollars. The full 1,000 dollars is in the account, but only 550 dollars can be withdrawn or spent immediately. As the check clears and the card charge posts, the two figures tend to move closer together.

Why It Matters to Investors

For brokerage accounts, a similar idea applies to cash. Unsettled trades can reduce the cash available for new purchases, and the figure shown may differ from the total value of the account. Some margin accounts report a separate measure of buying power, which can be higher than available cash but is subject to the broker's rules. Some accounts also permit an overdraft, which can push the available balance below zero.

Because the figure is a snapshot that changes as transactions post or settle, an investor who relies on an outdated number may find that a withdrawal or trade is declined.