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What is Account Balance

What Is Account Balance? Types and Examples

Updated on October 28, 2022

 Personal Finance

Simply put, your account balance is the total amount available at any given time in a financial repository like an investment, savings, or checking account. It's the total amount available for use after calculating the debits and credits. When your account balance shows a positive balance, it represents the available funds in your account. A negative balance, on the other hand, means the money you owe. Savings, checking, and brokerage accounts display your total available funds. An account balance could also refer to the amount an organization or an individual owes to a third party when discussing debts and bills.

What Are the Main Purposes of an Account Balance?

An account balance serves the following uses:

  • Your account balance is an excellent method to keep a detailed payment and income history in case a former outgoing or incoming payment needs to be proven.
  • Your account balance provides a convenient way of tracking all your transactions and managing your money coming and going.
  • Your account balance gives you up-to-the-minute and easy-to-access information regarding the amount of money you have.
Types of account balance

Types of Accounts

Whether you need a personal checking account, a business account, or a long-term retirement account, there are different types of accounts that hold funds available for you to spend. Any of these accounts will have an account balance for you to check if you can deposit or withdraw from.

Here are the primary account types:

  • Checking Account
  • Savings Account
  • Individual Retirement Accounts (IRA's)
  • Money Market Account
  • Certification of Deposit (CD)

Understanding these types of accounts will help you decide which one works best for you and your personal and business banking needs.

Checking Account

You can use a checking account for everyday spending, whether or not it's personal or business. Link a debit card to the account and use it for purchases or deposit or withdraw cash at ATMs. Most checking accounts do not build interest, but they are excellent for your daily transactions and allow you to pay bills, deposit cash, and write checks.

Some of the benefits include:

  • Excellent for paying bills and daily spending
  • Cash withdrawal from ATMs
  • Allows credit or debit card purchases
  • 24-hour access to online banking and funds
  • Personal checking or business checking accounts are offered

Savings Account

Grow your savings in an interest-earning, secure setting with a savings account. You have full-time access, like a checking account, but it offers additional services. It's an excellent way to keep your extra cash and avoid the temptation to spend it.

Some of the benefits include:

  • Compliments your personal checking account
  • Electric transfer of funds between checking and saving accounts
  • Great for beginner investors
  • Builds interest over time

Individual Retirement Accounts (IRAs)

An IRA is similar to a long-term savings account. These types of accounts are specific for saving for retirement. They are unique because they offer tax advantages and allow you to invest in the stock market. Walking you through the best low-risk strategy for long-term investment, an accounting professional can help you create a successful IRA.

Some of the benefits include:

  • Tax breaks
  • Good for long-term investing
  • Invest money in the stock market

Money Market Account

This type of account combines the features of a checking and savings account. You can deposit or withdraw cash and gain interest and write checks as well. If you prefer to keep all of your funds in one flexible account where you can use your card at ATMs, have access to your balance details and other services, a money market account will be a good fit.

Some of the benefits include:

  • Combined benefits of checking and savings accounts
  • Gains interest
  • withdraw cash and write checks
  • Access to balance details
  • ATM balance inquiry

Certification Of Deposit (CD)

If you are looking for an account similar to a savings account, except it holds your funds for a fixed term, a CD would be right for you. Whether the term is set at 6-months or a year, you choose the time for your funds to sit, building interest.

Compared to saving accounts, a CD builds interest faster, but you can't withdraw the funds until your chosen time limit. If you do, you are charged penalty fees.

Some of the benefits include:

  • Excellent for large amounts of funds to grow interest
  • No-risk
  • Builds interest faster than a standard savings account

Account Benefits

Whichever account type you choose, these are the key features to look for that will benefit you: Available credit and total balance

  • Daily balance and monthly balance statements
  • Direct deposit
  • Mobile deposit
  • Fraud detection
  • Customer service support

How to Check Account Balance?

You can check your account balance in the following ways:

  • You can visit the banking/lender website where you have opened your account. Log in or sign in with your credentials and view your account balance.
  • You can know your account balance by directly calling the lender/bank and asking for the required information.
  • You can also visit your nearest branch and inquire about the account balance.
Account balance vs Available Credit

Account Balance vs. Available Credit

An account balance represents the funds or money left in your account after balancing all the debits and credits. However, the difference between what you spent and what you put in, in the form of credit card payments, represents your credit card account balance. Then what do you mean by available credit? Are both the terms synonymous? No, they are not!

Lenders or credit card companies set a maximum credit limit up to which you can make a transaction using your credit card. You can make payments from the card as long as your purchases don't exceed your credit limit. As a result, your available credit is the sum of money you have left to use for purchases or to make payments. A maximum of 30% was an ideal Credit Utilization Rate (CUR), with the rest 70% as the available credit balance. However, now the financial experts consider 10% as the feasible CUR.

Financial institutions determine your credit limit based on different factors, and your credit score is one of them. Now, you may have this question in your mind- what is a credit score? It is a number that shows your creditworthiness. Financial institutions might look at your credit score when determining your eligibility for mortgages, personal loans, credit cards, or other lending instruments. If you have a poor credit score, you can improve it by maintaining an adequate minimum balance, clearing the pending charges and debt accounts, minimizing debt on your credit card to zero, making monthly payments, etc.

Account Balance Examples

To understand the concept more clearly, let's take some pivotal account balance examples.

Example 1: There is a person, say, X. He has recently purchased three items using his credit card. The credit limit is $1,000. The purchase amounts are $500, $150, and $225. However, along with these purchases, he has returned a product costing $200.

Account balance comprises all the debit and credit amounts. As a result, X's balance will be calculated after including the purchases and the returns he made.

Debit balance of X: Expenses incurred buying the products: $500 + $150 + $225.
The credit balance of X: Cost of the returned product: $200
Net spending: Debit balance - Credit balance: $675


Amount (in USD)

Total debit balance$875
Total credit balance($200)
Credit limit$1000
Net spending($675)
Account balance$325

Example 2: Let's suppose X has a current account with a balance of $1,500. He recently received a check for $2,500. Later, he writes a check to make a scheduled automated payment of $2,000. However, the payment check is yet to be processed. 

Since the check balance is not processed, the account balance for X will be:


Amount (in USD)

Opening balance$1,500
Check received$2,500
Account balance$4,000

But, the original balance or the funds he can withdraw will not be the same as the ascertained account balance. There will be a disparity in both amounts due to the pending transaction.


Amount (in USD)

Opening balance$1,500
Check received$2,500
Check written($2,000)
True balance$2,000


Account balance assists in identifying the total debits and credits you have. From a simple utility bill to recurring water bills, an account balance helps record every amount you owe and transactions you make. Moreover, it shows your net worth. Besides these advantages, keeping a close eye on your account balance can save you from scams.

Photograph of author Joseph Priebe

Joseph Priebe

Joseph Priebe takes pride in assisting audiences with his articles to help them make sound financial decisions.

With over ten years of experience writing financial content his goal at CASH 1 has always been creating engaging and easy-to-digest information for anyone searching for immediate or long-term monetary solutions.

When Joseph is not writing about personal finance, you can find him photographing the Southwest United States with his 4x5 Graflex Crown Graphic camera. He is based in Phoenix, Arizona.