How to Balance a Checkbook
Whether you are just starting out in this world with your very first checking account or if you've had your checking account for years, you'll need to know how to balance a checkbook. I can't emphasize enough the importance of keeping an accurate checking account balance at all times! I know, it's a pain in the you know what to keep up with your checkbook ledger, but if you've ever bounced a check then you know what can happen if your checkbook balance is just a little off!
Checkbook Balancing for Newbies
O.k., you've just setup your first checking account with your local bank and you feel excited, grown-up and maybe even a little scared. You should have walked out of the bank with a checkbook register and some temporary checks that will work until your real checks get printed and sent to you in the mail. Most checkbook registers have a box on the top right portion of each page labeled “Balance”. This is where you need to write down the dollar amount that you deposited in the bank and this will be your starting balance.
For each and every transaction that you make from your account you must log it a.s.a.p. in your checkbook ledger. If you consistently maintain your checkbook entries, then you should never have any problems with your checkbook balance being off! Here is a list of some of the different types of transactions that you can make from your new checking account:
- ATM Withdrawal
- Checks
- Debit Transactions (debit card)
- Credit Transactions (debit card)
- Automatic Debits
Get Access to Your Online Bank Checking Account
Most all banks offer an online banking service that allows you to login with your username and password and view all of your checking account transactions. It is a good idea to periodically compare your check register balance with the checking account balance from your online banking service. It is also important to understand how different checking account transactions work. For example, when you use your bank card at the store and enter in your PIN number, that's a Debit Transaction. When you swipe your bank card and then sign the receipt, you just made a Credit Transaction. What's the difference between a Credit Transaction and a Debit Transaction? When you use your bank card as a Debit Transaction the funds are removed from your account almost immediately. When you use your bank card as a Credit Transaction, a hold is placed on the amount of your purchase but the funds will not be transferred to the vendor for several days in most cases.
A Bounced Check Example
Let's say you have $100.00 in your checking account and you need some gasoline for your car. You pull up to the pump, swipe your bank card and pump $45.00 worth of gasoline into your vehicle. Chances are that unless you entered your PIN number into the machine at the pump, you just made a Credit Transaction. Now this is O.K. if you write the amount from your receipt into your checkbook ledger when you return home, but if you forget to do so, here's where you could potentially be flirting with bouncing a checking account transaction. After you bought gas with your bank card, go home and login to your online bank checking account and you'll notice that your checking account balance will most likely NOT show the gasoline purchase that you just made. You might still see that you have $100.00 in your checking account, but you really only have $55.00. Now, let's say that you keep a sloppy checkbook and you forgot to write the gasoline purchase down in your checkbook ledger. It's the next day and before you leave work you might login to your online bank checking account and check your balance before you stop by the grocery store on the way home. You've already forgotten about the gasoline purchase from the day before and you see that you still have $100.00 in your account. At the grocery store you buy $60.00 worth of food and pay with it by writing a personal check from your account. Guess what? You are now technically overdrawn on your checking account and it will cost you the amount of the check plus an overdraft fee of $30.00 - $35.00, or more. If you had written the gasoline purchase down in your checkbook ledger then you would have known that you could spend only $55.00 at the grocery store and would have avoided the heartache of being in the negative and paying overdraft fees.