What are the Ledger Balance and Available Balance?

The ledger balance and available balance are terms used by a bank for the cash position of a checking account. The ledger balance is the balance available as of the beginning of the day. The available balance may be defined in two different ways, which are as follows:

The ledger balance, plus or minus any subsequent activity during the day; essentially, it is the ending balance at any point in time during the day; or
The ledger balance, minus any checks deposited but not yet made available for the use of the account holder, as well as other credits that have not yet been posted to the account.

The latter definition is more commonly used.

Comparing the Ledger Balance and Available Balance

The key differences between the ledger balance and available balance are as follows:

Inclusion of pending balances. The ledger balance only accounts for transactions that have been cleared and settled, while the available balance factors in pending debits (e.g., holds on funds) and credits (e.g., deposits in process).
Update frequency. The ledger balance is updated at the end of the previous business day; changes are only made after transactions clear. Conversely, the available balance is updated in real time as transactions (like deposits or holds) are processed.
Real-time accuracy. The ledger balance does not reflect real-time account activity, while the available balance provides a real-time view of accessible funds.
Impact of holds. The ledger balance does not account for holds placed on funds (e.g., debit card transactions or checks in process), while the available balance includes the effect of holds, reducing the funds available for immediate use.
Purpose. The ledger balance is used for record-keeping and reconciliations, while the available balance is used to determine the actual funds a customer can spend or withdraw at a given time.
Overdraft risk. Transactions based on the ledger balance might result in overdrafts if pending transactions are not considered, while using the available balance helps reduce the risk of overdrafts.