What are Account Balances?

What are Account Balances?

An account balance reflects all credits minus all debits in a retail banking consumers account at a precise moment in time. The term account balance can also refer to the payment due on a credit card statement, or to a general ledger account, but for the purposes of this article, the definition will be confined to the amount of money a consumer has in their bank account available to spend at a given moment.

An account balance can be a quickly-moving target throughout the day, depending on the amount of pending and posted transactions moving in and out of the account.

Differences Between Account Balance and Available Balance

Although consumers are growing more savvy about financial terms, one area of confusion still exists around available balance vs. current balance. The confusion stems from pending payments shown on a customer’s bank statement. If you’ve ever checked your account balances online to see a host of “pending” transactions, you’ll understand why it can be a little tricky to determining your actual balance.

Bank account balances are a complex interplay of available money and pending transactions. Your current balance is the overall amount of money in your account, while available balance is the amount you can currently access. Available balance reflects current balance minus debits that have yet to be posted to your account.

Simply put, pending = the funds that haven’t yet been paid out of your account, while available = money you can access now. Learn more about all the factors that come into play in a customer’s bank account balance

How Big Data is Helping People Understand Account Balances

Big data has afforded banking consumers the unprecedented ability to access their account information in real time. In the past, banking customers had to manually balance their checkbooks with pen, paper and perhaps a calculator for end-of-month balancing. It was relatively easy to keep track of account balances when most transactions were handled in cash or check.

But as the use of credit and debit cards has exploded, so, too, has the need for precise, up-to-the-minute details on an account’s activity. The use of credit and debit cards has also accelerated the time before a transaction hits the bank, meaning the days of “floating a check” have nearly come to an end.

As the transactions pile up, accounting for them becomes more difficult. It’s not uncommon for people to conduct a dozen or more transactions in a day, especially when an account is shared between spouses or other family members. A trip to the grocery store here, a purchase from Amazon there, and it starts to quickly add up. Online apps and banking websites have simplified the ability to see these transactions in near real-time. Likewise, Big Data has helped customers better decipher what all these transactions are.

How Are Financial Institutions Using Account Balance Solutions?

An account balance is a vital piece of data for financial institutions considering which products best fit customers. When financial institutions make a decision about whether to offer a customer a mortgage, investment, cryptocurrency or other product, account balances factor into the credit risk model to determine how risky that potential borrower is.

Thanks to the innovative developers working to create APIs in partnership with FinTech companies such as Envestnet | Yodlee, this massive (and potentially messy) amount of data can be delivered clearly to the end user. Precise categorizations and clear descriptions of the transaction not only bring clarity to the consumer, but also reduce customer service calls and disputed transactions.

With tools such as Envestnet | Yodlee’s Personal Financial Wellness Solution, it’s getting easier for consumers to gain insights on how to improve their finances. Combining technology, analytical data and responsive design, these tools go beyond simple organization of data and provide real-world guidance customers can act upon.

By tapping into transactions from more than 18,000 data sources and 100,000 account types, Envestnet | Yodlee has relationships that provide coverage for nearly 100 percent of American financial institutions. The data is updated daily and on a massive scale to provide the best user experience. This suite of applications and APIs can be deployed across a variety of channels, creating the industry’s most detailed customer view, and enabling financial institutions to target users with the right products at the right time to increase revenue.