When you view your bank account online or call in to check your account, you likely get two balances — the ledger and the "available balance." Sometimes they equal each other, but in many cases they show different amounts. Know what an available balance means on your bank account so that you avoid overdrafts.
Ledger Balance
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The legder balance listed on your account is just the initial balance at the start of the banking day. The ledger balance does not include any additional transactions that occurred after the start of the business day, like deposits, withdrawals or debit card purchases. It is commonly the same balance as that at the end of the previous banking day, after accounting for all transactions from the previous day.
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Available Balance
The available balance listed on the account is the total amount you can withdraw. It is the ledger balance plus any deposit transactions, less withdrawals and debits from the account, that have occurred in the current bank business day. If the available balance for the day is a negative number, deposit that amount before the close of the bank business day to avoid deficits in the account. If you find yourself in that situation, call your bank as soon as possible to find out the time deadline for depositing funds for that day.
Considerations
Even if an account shows an available balance, that doesn't necessarily mean that the money has completely cleared. For instance, say an account holder deposits a check for $250 and the bank makes the funds immediately available as it waits for the check to clear. If the bank sends the check back with a problem, like insufficient funds, the available balance decreases again by $250. If the account holder has withdrawn that $250 based on that previous available balance, it could generate overdrafts.
Authorization Holds
Monitor authorization holds on your bank account when determining your true available balance. An authorization hold is an amount that is deducted from the ledger balance but has not yet posted to the account. For instance if you purchase gas using a debit card, the station places a temporary hold that ranges from a dollar and up. The amount does not equal the actual amount charged for gas until the transaction posts to the account. So for instance, if the available balance is $249 with a temporary authorization hold of $1, but you purchased $30 of gas, your actual available balance for withdrawal is $220. In some cases, a gas station or retailer may charge an additional hold amount, such as $50 or $75, which drops off the account after a few days.