Bank accounts typically maintain two balances, one called the ledger balance and the other called the available balance. A ledger balance is generally updated every day, and includes deposits and withdrawals that have already cleared. An available balance can be updated more frequently, and can include check and other deposits that aren't fully cleared. While a bank may allow you to withdraw if there are enough funds in your ledger balance, it is often best to make sure they're also in your available balance to avoid overdrawing your account if some deposits don't fully go through.
It is possible to withdraw funds from your ledger balance, although you should first check your available balance to see if the funds are actually present. The reason for this is that your available balance is updated much more frequently than your ledger balance.
Understanding Ledger Balances
A bank ledger balance is traditionally updated each day and includes all deposits and withdrawals that were made through the previous day. The balance on a monthly bank statement usually is the ledger balance as of the date the statement was issued.
The ledger balance can include funds that aren't available for withdrawal, such as check deposits that are on hold for verification. For instance, if you have a ledger balance of $300, but $200 of that consists of a recently deposited check that's still on hold, you will only be able to withdraw $100 from the bank.
Identifying Available Balances
Banks also often maintain a running available balance that is updated throughout the day as you make deposits and withdrawals, have checks deposited and use your debit card. This balance can be different from your ledger balance and usually indicates how much money the bank will allow you to withdraw at that moment in time. It usually doesn't include items like pending check deposits that aren't actually available for your use until they fully clear.
Since the available balance is updated more frequently than the ledger balance, and doesn't include pending charges, it can be more accurate in determining what's actually in your account and available for use. If you have questions about which balance you're seeing on a bank website or ATM screen, you can contact your bank for assistance.
Overdrawing Your Account
If you spend more than you have in your account, you can face overdraft fees or even incur legal penalties if you bounce a check by writing it for more than is in your account. For that reason, it can be a good idea not to write checks relying on your ledger balance, in case pending credits take longer than you expect to fully post to your account or there is any sort of problem with a check you've deposited.
Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.