Balances Demystified Current vs. Available Balances
At some point, everyone has glanced at their bank statement and wondered about the difference between the “current” and “available” balances. This difference, often termed as current balance vs available balance, can sometimes confuse. This relaxed guide breaks down these terms into simple explanations, making it easier for everyone to understand their finances better. This article takes this journey into the world of balances!
What is a Current Balance?
Think of your current balance as a diary that keeps track of all the money in your bank account. It’s like a big money tracker showing you how much money is there right now. But here’s the trick – it doesn’t just count the money you have; it also counts the money you might spend soon. If you wrote a check or bought something, even if the bank hasn’t finished dealing with it, that money is still in your current balance.
Diving into Available Balance
Imagine this as the money you can use right now. It’s like you are “ready to spend” money. To get this number, the bank takes your current balance and subtracts any “holds” on your money or transactions still being processed. For example, if you bought a fancy jacket online, they might immediately take the money out of your available balance, even if the shop hasn’t sent the jacket to your doorstep yet.
Why the Difference Matters: Current Balance vs Available Balance
SoFi states, “If an account goes a week or two without any activity, its available balance and current balance will likely be in sync. However, once purchases and payments are made with a debit card, that is when the available balance is likely to fluctuate.”
Understanding the difference between current and available balances is super important. Here’s why: Imagine you check your current balance and think, “Yay, I have lots of money!” But if you don’t look at your available balance, you might think you can spend more money than you can. This could lead to spending too much or even accidentally spending money you don’t have, which can come with extra fees and troubles.
Potential Pitfalls to Avoid
One big mistake to watch out for is thinking your current balance is your “spending money.” Trusting only this number can lead to money problems. Another common slip-up is forgetting about automatic payments. You might set up a payment to go out, like for your phone bill, but if you don’t remember it, you could spend more than you have in your available balance.
Tips for Keeping Track
Here are some tricks to help you keep an eye on both balances:
- Regularly check your account statements. These show you what you’ve spent and how much you can use.
- Keep a little extra money in your account, just in case. Having a buffer can stop you from accidentally overspending.
- Be patient. Sometimes, when you buy something, it takes a few days for the money to leave your account. It’s a good idea to wait until you’re sure the purchase is all done before spending that money again.
Understanding the concepts of current and available balances might seem small, but it’s a powerful tool for managing your money. It’s like having a safety net to ensure you don’t spend more than you should. Knowing the difference between the current and available balances is a smart step toward being financially smart. It helps you make informed choices and keeps your financial journey smooth and worry-free. Stay informed, and happy banking!