Available balance

Available balance is the amount of cash that the holder of a bank account can actually use. The available balance is calculated as the current balance, minus all deposits that have not yet been posted to the account. The difference represents a delay by the bank in crediting incoming funds to an account. The bank needs to impose this delay in order to wait for funds from the issuing bank. The impact on the account holder is that a certain amount of cash cannot be withdrawn from the account until deposited checks have been credited to the account. This clearing period is usually about two days, though it can be much longer when a check has been drawn on a foreign bank. Also, a bank can place a hold on a check for a variety of reasons, such as when it suspects that a check cannot be collected or when the check exceeds a certain dollar amount.

An account holder that issues checks exceeding the amount of the available balance may incur an overdraft fee from the bank, which represents a short-term loan from the bank to the account holder.

Related Courses

Corporate Cash Management