Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.
With banking becoming more digital-centric, balancing a checkbook can seem akin to using a rotary phone.
However, there's some merit to writing a check and tracking your spending this way. When you balance your checkbook, you force yourself to track each transaction, which can help you become more mindful of your spending.
Think of balancing a checkbook as a way to reset your financial life. It can be a back-to-the-basics money retreat or a cleansing. Here's everything you need to know about how to balance a checkbook..
- How to balance a checkbook: Step-by-step guide
- What is a checking account?
- How is a checking account different from a savings account?
- Are there any common mistakes when balancing a checkbook?
- What are other ways I can track the balance on my checkbook?
- I sent a check that bounced; What fee will I pay?
How to balance a checkbook: Step-by-step guide
1. Get your initial balance
Take out your checkbook and jot down your available balance on the register. The register is the section of the checkbook that has several columns for tracking expenses, including date, description and amount.
2. Track everything
Now that you know what you need, you're going to note in the register each time you use your checking account. That includes deposits, pending bills, ATM withdrawals, rent payments, debit card purchases, banking fees and more. Be as detailed as possible. Make sure to include the amount, the date, a description of the transaction and — if it's a check — the check number.
This tracking is as simple as it gets: Starting with the first transaction, subtract (or add if it's a deposit) the designated amount from the available balance. Repeat this for every transaction.
3. Review your statement
When you reach the end of the month or recieve your bank statement , it's time to check your math. Begin with the first transaction and make sure you've tracked it in your register. If you have, make a check mark or highlight it so you know it's been verified.
4. Check the ending balance
Once you have gone through all the month's transactions, check if the ending balance on the bank statement matches the ending balance on your checkbook register. If it does, congrats, you have balanced your checkbook. Call a relative and let them know. They’ll be proud.
5. Correct any mistakes
If your balances are off — even by pennies — you'll want to go back through every transaction. Remember: Balancing a checkbook is all about the details. Pennies matter. Grab a calculator and double-check all the numbers. Chances are you likely missed logging something in the register since it's easy to miss a transaction. If you notice that a fraudulent charge is what threw off your balance, report it to your bank immediately.
6. Mark a new start
When everything is correct and your checkbook is properly balanced, you'll want to designate it in your register. Draw a line across the register and mark the date and balance. By doing this, you'll have an easy reminder of when the new set of transactions begins.
7. Store necessary documents
If you need to start tracking on a new register, first note your balance in the new one. When done, stash your old register and bank statements in a filing cabinet. You should keep bank statements for a year before shredding them.
Checking account FAQ
What is a checking account?
A checking account is an account held at a bank or credit union that allows easy access to your funds. Generally speaking, you want your checking account to have high interest rates and low monthly fees. If you're hoping for the highest rate, check out high-yield checking accounts. These accounts can offer sky-high rates — Consumers Credit Union starts at 5.09% APY, for example — as long as you meet certain criteria.
How is a checking account different from a savings account?
A checking account is mostly for short-term money, while a savings account is for long-term needs. Checking accounts on average offer lower interest rates than savings accounts (0.197% APY versus 0.278% APY, respectively). Checking accounts are also different from savings accounts in that there is usually no cap on how many transactions you can make per month. Savings accounts are capped due to federal Regulation D, which limits the number of transfers or withdrawals you can make to six times per billing cycle. It doesn't matter if you're withdrawing a penny or $10,000.
Are there any common mistakes when balancing a checkbook?
One of the more common mistakes when balancing a checkbook is forgetting to log a transaction in your register. Do your best to log every single thing — payments, debits, fees, etc.
What are other ways I can track the balance on my checkbook?
There are many budgeting apps and online tools you can use if you'd rather go the digital route. You could start with Mint, PocketGuard or Wally. Expand your search if none of those suit you. The important thing is to find an app that you'll use.
I sent a check that bounced; What fee will I pay?
If a check bounces, that means you didn't have the money to cover the amount of the check. When this happens, you'll typically get hit with a non-sufficient funds (NSF) fee from your financial institution. For example, Bank of America charges a $35 NSF fee. Unfortunately, the hits don't stop at your bank. You'll also typically have to pay the retailer who received the bad check since it likely got charged for attempting to deposit it. It passes the fee on to you. In short: Don't write checks unless you're certain you have the money to cover them.