Pending Balance vs. Available Balance: Which Amount is Most Accurate?
You may have noticed that your bank account reflects two balances.
The first is your available balance and the second is your pending balance (or current balance), more often referred to as your account balance by most banks.
You’re not alone.
Though the existence of the two balances seems to be more of a technical matter for the bank itself, failing to understand the difference between the two can cost you money, and even result in a poor relationship with your bank.
What Does Pending Balance Mean?
Your available balance reflects the amount of money in your account before adjusting for pending charges. This is the amount that you can withdraw at any given moment.
The current balance (or pending balance) is the amount of money in your account when it accounts for pending transactions.
For accuracy purposes – and to avoid incurring fees from your bank – you should use the available account balance as your actual account balance.
Difference between "available balance" and "pending balance"?
Most typically this is due to transactions using your debit card. Your bank will be aware of the debit card transactions and reflect it in your pending or account balance.
However, the merchant where you used the card may not have submitted the charge for payment yet.
In that case, the charge is sitting in pending status.
The bank is aware of it and has deducted it from your available balance. But it has not yet been confirmed by the submission of a charge by the merchant where it was incurred.
The same situation can develop where you make a cash withdrawal using your debit card at an out-of-network ATM machine.
Those mysterious pending charges
There are two other less common reasons for a pending charge.
Tips on a bill
A charge may not be final. Restaurant charges are a common example.
Restaurants will run the charge for the basic cost of the meal. But if you add a tip, it won’t be charged to your account until final payment is settled with the bank.
Hotel and car rental “holds”
These have become a common practice. A car rental company may charge a $200 hold against your account in anticipation of damage to the vehicle.
If the car is returned damage-free, the hold will be released.
Hotels commonly do the same, except that the hold not only covers potential damage but also additional charges of the room, like room service or purchases made at the hotel.
In either case, the hold is usually released at the end of your stay or rental, or within 24 hours later.
Pending Transactions Not Reflected in Pending Balance
There are some important exclusions from the account or pending balance that you should be aware of.
First and foremost are checks you have written and mailed, but have not yet cleared your account.
The bank will not be aware of those outstanding checks until they’re presented for payment.
Automatic transfers or bill payments
Another example is upcoming automatic drafts or scheduled payments through a Bill Pay service.
For example, you may have an automatic draft or a bill payment scheduled for tomorrow. That will not be reflected in either the current or the pending/account balance.
That’s why it’s super important to maintain an accurate check register.
In it, you should record all transactions, and deduct them from the balance accordingly.
In a very real way, the account balance reported by your bank – whether it’s the current balance or the pending or account balance – is a moving target.
And even your bank is not fully aware of all transactions pending or upcoming.
Is the Money Already Added or Deducted from the Account?
A pending transaction of any kind is one that’s getting ready to happen.
The bank is aware that action has been taken, but the funds have not yet been either withdrawn from your account or added to your account in the case of deposit – at least not officially and finally.
You should assume the pending balance to be closer to the actual balance (adjusted for checks and other transactions the bank may not yet be aware of).
The situation is more complicated with pending deposits, which should be ignored until they fully clear your account. (We’re going to get into a full discussion of funds availability policies for deposits in a bit.)
Does Available Balance Include Pending Transactions?
This is the whole point of the available balance. It reflects your current balance, less those pending transactions.
The bank deducts them in anticipation that they will ultimately be completed.
This is why your available account balance is closer to your true balance than the current balance that appears at the top of your bank statement.
Do Pending Transactions Mean They Went Through or Posted Successfully and are Fully Cleared?
Pending transactions mean exactly what the name implies. The charges are merely anticipated, based on activity in your account.
But they won’t become fully effective until they are submitted by the merchant, and have fully cleared your account.
Can You Spend Money that's Part of a Pending Deposit?
One of the most common reasons for a pending balance is the funds availability of deposits.
Bank customers often assume they can deposit a check into their account then get cash back immediately.
That’s not typically the case, and where it is, the amount you can withdraw against the deposited item will have limits.
Every bank has a funds availability policy that spells out exactly when funds from a deposit are available -- it could take weeks.
Variables can include the source of the check, the amount, and the deposit method.
For example, in the case of a direct deposit, your bank may make the funds from the deposit available immediately. It may also hold them as a pending transaction, then make the funds available on the next business day.
Example of a bank’s funds availability policy
Let’s use J.P. Morgan Chase as an example since it’s the largest bank in the US.
According to their Deposit Account Agreement, you can generally withdraw funds from your checking or savings account the next business day after the item is deposited.
But there are some limitations imposed under the J.P. Morgan Chase Funds Availability Policy.
Here’s a summary of that policy:
- Wire transfers, electronic direct deposits and cash deposits are available on the day the deposit is received. With other deposits, funds are available on the first business day after receipt of the deposit..
- If you make a deposit with a Chase branch teller, it will be considered a same-day deposit as long as it’s made before the deposit cut off time for that specific branch. If the deposit is not made on a business day, or it’s made at an ATM after the ATM cut off time (usually 11:00 pm Eastern time), the deposit will be considered as having taken place on the next business day.
- A business day is every day except Saturdays, Sundays and federal holidays (this is a typical bank definition of a “business day”).
- Deposits made in a night depository are considered received when removed from the depository by the bank. Deposits will be posted no later than the next business day.
- Checks mailed to the bank are considered received on the date the deposit is received at that facility.
The provisions above are the general policy. Under certain circumstances, the bank may not make all the funds deposited available on the first business day after the deposit.
They may not be available until the second business day, however the first $200 of the deposit will be available on the first business day after the deposit is made.
Special limitations on certain deposits
Funds availability on deposited checks at J.P. Morgan Chase may be delayed longer than two business days if any of the following apply:
- The bank believes a check may not be paid.
- You deposit more than $5,000 in checks in any one day.
- A check that has been returned unpaid is redeposited.
- You’ve overdrawn your account repeatedly in the previous six months.
- There is an emergency, such as a failure of communications or with the bank systems.
If any of the above situations apply, the bank may delay the availability of the entire amount of the check, including the first $200. The delay can extend up to seven business days after the date of deposit.
That’s a general overview of the funds availability policy at J.P. Morgan Chase. The policy is common to all banks, but each will have its own specific limitations.
You should familiarize yourself with your bank’s funds availability policy, either when you open your account, or even now if you haven’t before.
When Unavailable Funds End Up Costing You
If you ignore the policy, and begin writing checks or making payments on the full amount of the deposit, and those charges are presented to the bank before the check clears, you can incur penalty charges.
The situation will be magnified if the deposited item ultimately fails to clear your bank. In that situation, you may face several fees at once.
In the case of pending deposits that don't actually clear, the bank will likely charge you a returned deposit item fee on the dishonored deposit.
And, if you wrote a check expecting those deposits to clear and don't have enough money in your account, you get hit with a non-sufficient funds fee.
The moral of the story:
Know your bank’s funds availability policy, and ignore your current balance in favor of the available balance.
It’ll save you a small fortune in fees, and keep you in good standing with your bank.