Fast Facts: What's the Real Balance in My Bank Account?
If you've ever logged into your online banking platform to find a negative checking account balance, you know the stomach-dropping, sweat-inducing feeling that follows. It's even worse when you know you deposited a check yesterday, but somehow you're in the red today. Here's a quick guide to four key banking concepts you need to understand to avoid overdrafting your account.
1. What is my available balance?
Your available balance is the total amount of money that you have immediately accessible from your account. Your available balance typically reflects items that have been paid from your account, as well as certain same-day transactions (such as debit card purchases and direct deposits) that are pending.
However, be aware that your available balance does not include items that you authorized but that haven't been presented for payment. This might include checks that haven't been cashed yet or recurring payments. Recurring payments are payments you have agreed to have electronically deducted from your account on a scheduled basis, such as gym memberships and insurance premiums.
Why is this important? If you spend all of your available funds available before these recurring items are presented for payment, you risk overdrawing your account and incurring significant fees. That's why it's critical to keep track of those items that have not yet been paid from your account to avoid an overdraft situation.
Overdrafting on your account is a real pain, especially considering overdraft fees can be as much as $40. Know how to prevent overdrafts.
2. What's a pending transaction?
Pending transactions are transactions that haven't been fully processed yet. For example, if you make a purchase with a debit card or credit card, it will almost always show as pending immediately when you view your account online or in a mobile banking app. That's because the merchant who accepted your debit or credit card runs an online check before completing your purchase to make sure the card is valid, and that you have enough money in the account to cover the purchase. If so, the purchase is authorized and a hold for the amount of the purchase is placed on your account.
These transactions are listed as pending during the one to three business days it takes for the merchant to send their file to the bank requesting payment. Once the bank sends the merchant the money owed, the transaction will no longer show a pending description online or via mobile banking, and the transaction will be considered complete or posted.
3. What's a posted transaction?
A posted transaction is a transaction that has been fully processed and completed. Typically financial institutions will “post" all transactions that have been presented to your account at the end of the day.
It's important to know how your bank prioritizes items to be debited from your account. (For example, are items processed according to date and time you made the transaction, or are they first grouped by type of transaction and then processed by the time that transaction was received at the bank?) How items are posted affects how overdrafts are incurred and how fees are applied. Some institutions may post multiple times in a day or post live, so it is important to understand how your institution works. During posting, “pending" transactions that have been received throughout the day and are ready to be settled (paid) will become “posted."
4. What does it mean when a deposit is on hold?
Sometimes when you make a deposit, the money isn't available to use right away. That's because the bank needs to verify that the deposit is legitimate and will place a hold on the funds until the issuing bank sends the money over to your bank. Each bank has a “funds availability" policy, which details how long it's able to hold your deposits before posting them, in essence making them available in your account. Most transactions will post within one business day, though there are some exceptions. The federal government passed the Expedited Funds Availability Act in 1987 to ensure banks don't hold onto your money for too long.
Don't let the terminology confuse you. We're here if you have questions or if you want to talk with a local banker about overdraft protection options.
Important Disclosure Information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Life (and the occasional overdraft) happens! You have options to help keep your account on track.
Synovus Card Alerts makes it easy to get real-time updates about your account activity.