How to Balance a Checkbook

How to Balance a Checkbook
••• Khanchit Khirisutchalual/iStock/GettyImages

Balancing a checkbook may seem antiquated in this age of online banking and mobile banking apps. According to the Federal Reserve, debit transactions exceeded check payments in 2018 for the first time in the United States. Additionally, the COVID-19 pandemic accelerated the adoption of touchless payment options.

Even if paper checks have fallen out of favor, balancing your checkbook the old-fashioned way is still the most reliable and real-time method for tracking your current balance. It can also be helpful to find a mobile budgeting app to help you reach your personal finance goals.

Record every deposit and withdrawal during the monthly statement period. Take the sum of the two numbers and subtract all checks and other withdrawals. Essentially, this is what it means to balance a checkbook.

What Is an Account Balance?

A checkbook balance is the amount of available funds in the account. The significance here lies in the account activity and transactions that resulted in that available balance. A negative balance indicates the bank has provided a short-term loan to the account holder, known as an overdraft, per AccountingTools.

The check register that your financial institution provided to you upon opening the account is a valuable tool. It allows you to record incoming and outgoing money with a running total for your bank balance. You can also record a memo for each transaction such as “utility bill payment” with the associated check number. You will reconcile your check register against the ending balance on your monthly bank statement.

Why Balance My Checking Account?

Many people attempt to keep track of their checking account balances by checking the ATM or logging into their personal accounts on their mobile app or bank website. These methods are unreliable. For example, you might have forgotten about an outstanding check or bank fees from a foreign debit transaction. It is a best practice to compare your personal financial records against the bank's records.

A balanced checkbook lets you know how much money is available to cover any outstanding charges. This can help you avoid overdraft fees and bounced checks. Next, it will help you to understand where your money is going, a necessary step in developing a budget to save money. Finally, you can promptly identify suspicious activity or incorrect charges to the account and take corrective action.

You will want to make sure that your checkbook register is fully up to date. Do this by recording every deposit and withdrawal during the monthly statement period. Take the sum of the two numbers and subtract all checks and other withdrawals. Essentially, this is what it means to balance a checkbook.

How to Reconcile a Checkbook Register

  • Review your receipts and register:​ Review your checkbook register monthly and your receipts to ensure that you have recorded all of your transactions up to the current date. Organize your receipts by date and review your register to ensure they are all recorded.
  • Verify charges and deposits:​ Verify all charges and deposits into the account including direct deposits and be sure to include debit card charges not recorded in the check register. You will also want to include things like bank fees and interest earned.
  • Compare balances:​ Start by comparing the starting balance for the period against your previous month’s statement. Then, compare the balance in your checkbook register on the statement date that your current bank account statement was printed with the statement balance.
  • Ensure the numbers match:​ Place a checkmark on the line for each transaction that matches the statement. If the numbers match, then you have accounted for all transactions.
  • Address errors and discrepancies:​ Adjust your checkbook register to correct any discrepancies that you have made. Be sure to double-check for any outstanding charges or checks from the previous statement period. If your statement reflects the wrong amount, call the bank to correct any errors or report unauthorized activity.
  • Follow up on transactions:Education First Credit Union stresses that you should follow up on any transactions older than ​60 days​ that are not on your statement. You might be missing a deposit or need to initiate a stop payment.