How to Balance a Checkbook

What Does It Mean to Balance a Checkbook?

Balancing a checkbook just means comparing your bank's records with your own to make sure everything lines up. You don't need to be writing paper checks to balance a checkbook.

Whether you use a notebook, spreadsheet or even a budgeting app, keeping track of your transactions lets you catch mistakes, spot fraud and stay on top of your spending.

Why Is It Important to Balance Your Checkbook?

Balancing your checkbook is a way to verify that each bank deposit, debit card purchase, money transfer and withdrawal is accurate. Checkbook balancing can help you:

• Catch and report banking errors
• Track spending and gain a better understanding of your expenses
• Identify deposits that don't clear
• Spot fraud, unauthorized purchases or withdrawals
• Avoid overdraft fees
• Ensure automatic payments and transfers are processed correctly
• Reconcile outstanding checks or payments you've written
• Maintain accurate records for tax purposes
• Detect duplicate charges or recurring subscriptions you forgot about

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How to Balance Your Checkbook

Reconciling your bank account is a monthly financial task that could take under an hour. Here are the steps to balance your checkbook.

1. Choose Your Recording Method

The traditional place to log your transactions in a checkbook is called a check register. This provides a place to input all pertinent information related to every transaction, including purchases, deposits and things like refunds.

If you don't have a check register, you could download a free check register template online or create one that works for you with an app or notebook. Below is an example of the column headings to include on a do-it-yourself check register if you create your own. The left column allows you to add check numbers or your own codes for transactions such as debit card purchases and deposits.

2. Log Your Beginning Balance

Once you've decided how to log transactions, put your starting bank account balance at the top right of your table. If you pull your balance from an online banking dashboard, use your available balance, which includes pending transactions. Here's an example of what that would look like:

3. Add Each Account Transaction

Each time you add or remove money from your account, include the transaction in your log and calculate your new balance.

Transactions to list include all checks you write, ATM withdrawals, bill payments, debit purchases, money transfers, deposits and any other type of transaction that causes a debit or credit to your account. Here's an example:

4. Compare Your Check Register With Your Bank Statement

At the end of the statement period, use your check register to reconcile the balance and each transaction to your bank statement. If your balance and transactions match up, your work is done, and you can start logging transactions for the next month. If there's a mismatch, it may take some work to figure out what the cause is.

4 Reasons Your Checkbook Might Not Balance and What to Do

If your check register and bank statement don't match up, double-check your math to see if there are any adding or subtracting errors in your register.

Next, make a note of unusual transactions and missing deposits to investigate further. If you're confident in your math, here are some potential reasons for your bank balance to be off and what you can do about it.

1. A Check Hasn't Cleared

Banks may hold checks to verify funds or bounce a check entirely if the check writer's account has insufficient funds.

If a check doesn't clear, you may need to contact the check writer for another payment, ask when the recipient of a check you wrote plans to cash it or contact the bank to ask how long the check-clearing process will take.

Learn more: How Do Bank Holidays Affect Direct Deposit?

2. You or Your Bank Makes a Mistake

Banking mistakes can happen. Maybe you write in $50 instead of $500 when processing a check deposit, resulting in an end-of-month shortage of $450. Or a bank teller types in the wrong amount when you deposit a check in person.

In this scenario, gather backup to prove your case for why it's an error and contact the bank for instructions on how to fix the issue.

3. A Merchant Makes a Mistake

A merchant might accidentally overcharge or double-charge you, throwing off your check register. If that happens, reach out to the merchant first to dispute the charge, then report it to your bank if needed.

If you return an item, sometimes it can take several weeks for a retailer to issue a refund. In this situation, you may need to hold off on recording the refund credit to your check register until the merchant processes it and it shows up as a refund on your bank statement.

4. You're a Victim of Fraud

If someone's making unauthorized purchases, your account balance at the end of the month could be lower than expected. Acting fast can help limit your liability, so report suspicious charges to your bank right away.

Learn more: How to Protect Your Bank Account From Fraud

The Bottom Line

Balancing your checkbook might sound like it's just about keeping tabs on paper checks, but it really means tracking all your bank transactions and making sure they match what shows up on your monthly statement.

You don't need anything high-tech to get started, either. There are plenty of apps that can do the heavy lifting, but a simple spreadsheet or even just a pen and paper can do the job. The goal is just to keep a clear picture of where your money's going so you can spot any issues and make smarter decisions with your money.