Understanding the financial terminology used by banks is crucial for managing your finances effectively. Two terms that often confuse people are “balance” and “available balance.” This article will delve into the differences between these two terms, with a specific focus on South African banks.
Understanding Balance
The term “balance” refers to the total amount of money in a bank account. This includes all the deposits and withdrawals that have been made. It’s the gross amount, without considering any pending transactions or holds that might be placed on the account.
For instance, if you deposit R1000 into your account, your balance will show as R1000. If you then withdraw R200, your balance will be R800. This is a straightforward concept that most people understand. However, the confusion starts when we introduce the term “available balance.”
Understanding Available Balance
“Available balance” is the amount of money in your account that you can use without incurring any fees or penalties. It’s your balance minus any holds or pending transactions.
For instance, let’s say your balance is R1000, and you’ve written a cheque for R200 that hasn’t been cashed yet. Your available balance would be R800, even though your balance still shows as R1000. This is because the bank has earmarked that R200 for when the cheque is cashed.
In another scenario, you might have deposited a cheque for R500 into your account. While your balance will increase by R500 immediately, your available balance might not change until the cheque has cleared, which could take a few days.
Why the Difference Matters
The difference between balance and available balance is important because it affects how much money you can spend or withdraw from your account. If you try to spend more than your available balance, you might incur fees for insufficient funds, even if your balance shows that you have enough money.
In South Africa, these fees can be quite high, so it’s important to keep track of your available balance to avoid them. Some South African banks also offer overdraft protection services, which can cover transactions that exceed your available balance for a fee.
How South African Banks Handle Balance and Available Balance
Different banks might handle balance and available balance slightly differently, but the general principles are the same. Here’s how some of the major South African banks handle these terms:
Standard Bank
Standard Bank shows both your balance and available balance when you check your account. They also provide a detailed breakdown of any pending transactions or holds that might affect your available balance.
ABSA
ABSA also shows both balances, but they use the term “ledger balance” instead of “balance.” They also provide information on any transactions that are still being processed.
Nedbank
Nedbank uses the term “current balance” instead of “balance,” but the concept is the same. They also show your available balance and provide information on any pending transactions.
FNB
FNB shows both your balance and available balance, and they provide a detailed breakdown of any transactions that are affecting your available balance.
Conclusion
Understanding the difference between balance and available balance is crucial for managing your finances effectively. By keeping track of both, you can avoid unnecessary fees and make the most of your money. Remember that different banks might use slightly different terms, but the underlying concepts are the same.
If you’re ever unsure about your balance or available balance, don’t hesitate to contact your bank. They can provide you with the most accurate and up-to-date information.
In the world of banking, knowledge is power. The more you understand about your account and how it works, the better equipped you’ll be to make smart financial decisions. So,keep learning, keep asking questions, and keep striving for financial success.
