# Account Balance

 Image: Moneybestpal.com

### An account balance is the amount of money that you have in a specific account at a given time. Depending on whether you have more money coming in or leaving the account, it could be either positive or negative.

For instance, your account balance will be \$200 if you deposit \$500 into it and spend \$300. Your account balance will drop to -\$50 if you spend a further \$250; at that point, you will have overdrawn your account and be in debt to the bank.

An account balance can also refer to the amount of money that you owe to a third party, such as a credit card company, a utility company, or a mortgage lender. For instance, if you use your \$1,000 credit limit credit card to make \$600 in purchases and pay back \$200, your account balance will be \$400. This means you have \$600 left over to spend or repay after using 40% of your available credit.

#### How is an account balance calculated?

An account balance is determined by adding up all the credits and debits that occur during a specific time period. Any sum of money that raises your account balance, such as a deposit, a payment you get, or interest you earn, is referred to as a credit. Every financial transaction that lowers the balance of your account, such as a withdrawal, a payment made, or a fee levied, is referred to as a debit.

As an illustration, suppose you have \$500 in your checking account at the beginning of the month. You get paid \$2,000 in a month's time, pay \$1,000 in rent, spend \$300 on food, and take \$100 out of an ATM. To calculate your account balance at the end of the month, you need to add up all the credits and debits:

Account balance = Starting balance + Credits - Debits

Account balance = \$500 + \$2,000 - (\$1,000 + \$300 + \$100)

Account balance = \$1,100

#### Why is an account balance important?

There are a few reasons why it's crucial to know your account balance. The first benefit is that it aids in budget management and revenue and expense tracking. You may avoid going over budget or overdrawing your account by keeping an eye on your account balance on a frequent basis.

The second benefit is that it aids in maintaining good credit and averts idly paying fees or interest. You can see how much debt you have and how much you have to pay back each month by looking at the amount on your credit cards or other loans. You can raise your credit score and become eligible for future loans with lower interest rates and better terms by paying your bills on time and minimizing your credit usage (the proportion of your available credit that is used).

Finally, it assists you in setting and achieving financial objectives. You can check your savings or investment account balance to see how much money you have amassed and how far you are from your goal amount. Based on your account's performance and the state of the market, you can also modify your savings or investment strategy.

#### How can you check your account balance?

There are different ways to check your account balance depending on the type of account and the financial institution that holds it. Some of the most common methods are: