Understanding Ledger vs. Memo Balance: What's the Difference?

Keep track of your balances to avoid surprises at the bank.

If you monitor your checking account online on a daily basis, you have probably seen that you have two kinds of balances: memo balance and ledger, or available, balance. Often, these balances have two different numbers. Depending on the amount of activity your account has had in a particular day, there can be quite a gap between the two values. Knowing the difference between these two terms can save you a lot of stress when you're checking on your finances.

Ledger Balance

Also known as your available balance, the ledger balance shows your account balance, taking into account all transactions officially posted. These would include cleared checks as well as debit card transactions that have been finalized.

Memo Balance

This balance takes into account all items when they "hit" your account. If you've gone to a restaurant and used your debit card to pay, the amount of the food and beverage will usually post to your memo balance right after the server swipes your card. However, the amount of the purchase won't be correct if you also tipped on your card because the tip won't be added in until reconciliations at the end of the night.

What Does the Difference Mean?

Let's say you have a ledger balance at the beginning of the day of $1,200. During the day, you go to Target and spend $75 and pay with your debit card, but the cash register accidentally charges you twice. Then, you go out for a fancy dinner and pay with the same card. The tab is $150, and you tip $30 more. Your ledger balance won't change, but your memo balance will now be $900 ($1,200 - $75 - $75 - $150). Your bank, though, will normally remove a duplicate charge automatically and then adjust the balance again when the tip comes through. The correct ledger balance after those transactions post should be $945 ($1,200 - $75 - $180). It may take a day or two for that tip to make its way through, though.

How Can I Tell What Has Posted?

When you pull up your account history, most banks will list your pending transactions first and then your posted transactions. Pending transactions have hit your debit card but have not officially posted to your account. They will generally affect your memo balance but not your available balance. Other banks put a "p" for "pending" in the column next to transactions that are still waiting to post.