How to Balance a Checkbook - MagnifyMoney

How to Balance a Checkbook

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Even in a world of paperless banking, you may still have a checkbook. You can use a checkbook’s physical register (or a digital version of it) to balance it, which means to check the transactions you’ve personally tracked against the ones in your bank statement.

By balancing a checkbook, you maintain a sense of what’s truly in your account and where your money goes.

Key takeaways

  • Balancing your checkbook is comparing your transaction records with your bank statement
  • To begin, track your transactions in a spreadsheet, app or checkbook register
  • If your records don’t match your bank statement, you may be catching an error
  • If you notice any fraudulent activity, report it to your bank as soon as possible

What is balancing a checkbook?

Balancing a checkbook is simply adding up your monthly credit and debit transactions and comparing the results with your bank statement. Even though digital banking does a solid job of keeping track for us, you can still check yourself to ensure there’s no fraud or error taking place and you’re not overspending. By balancing, you’ll access all your transactions, including direct deposits, ATM withdrawals, automatic bill payments, checks and more.

Whether you compare transactions using paper statements or online records, the goal remains the same: to know your true balance and catch costly mistakes.

For example: Let’s say your checking account balance is $500. But you recently wrote a check to a friend for $200. That check hasn’t been cashed, so it won’t show up in your account just yet. Rather than thinking you still have $500 to spend, you can keep track of that $200 outstanding check (and your actual $300 bank account balance) by balancing your checkbook.

Why should you balance your checkbook?

It’s a healthy financial habit to keep an ongoing record of your transactions (and balance that record regularly) for several reasons:

  • Banks and vendors can make mistakes: Keep an eye on your monthly transactions to catch when a bank or vendor makes a mistake, like processing a payment twice or charging the wrong amount.
  • It makes it easier to budget: To track your transactions is to track your spending and saving. When you balance your checkbook, you can understand your spending habits and use that to create a better budget.
  • It can catch fraud: Fraudulent activity on an account doesn’t always have to be a lump sum of money. Sometimes, it can start with smaller transactions that go unnoticed. When you keep tabs on your account, you can catch fraudulent debit card charges quickly, report them and hopefully get your money back.
  • You can make mistakes: Mathematical errors happen all the time. Balancing your checkbook can help you avoid overspending, overdraft fees (especially if you don’t have overdraft protection) and bounced checks.

Tip: Start with a checking account with no overdraft fees. It’s one less thing to track or worry about if something gets overdraft by human error. 

How to balance a checkbook in 6 steps

Balancing a checkbook used to be all paper. Today, you probably receive electronic statements (eStatements) and use a physical checkbook register, budgeting app or your own spreadsheet to track your transactions.

So, what does it mean to balance your checkbook? Below, we list the steps for balancing your account:

1. Get out your checkbook register or make one

A checkbook register, also known as a check ledger or balance book, is a record of your transactions –– whatever is coming into or going out of your checking account. You could use the log in the back of your checkbook, or record transactions in a spreadsheet or an app. If you’re creating it manually, make sure you include:

  • Check number (if applicable)
  • Transaction date
  • Transaction description (i.e., electricity bill or check purpose/recipient)
  • Withdrawal/payment amount (which you’ll subtract from the balance)
  • Deposit amount (which you’ll add to the balance)
  • Balance (calculated after each transaction is recorded)

2. Write down your starting balance

Log into your checking account (or call your bank) to find out your current balance. This is the first thing you’ll record in your register.

3. Record credits, income and interest earned

Now that you have your starting balance, regularly record your deposits and all corresponding information about those deposits in the appropriate columns. Credits include direct or cash deposits, paychecks and any other credit amounts (such as corrections by vendors or institutions). Add each of these to your balance and record the new balance.

4. Record all payments and fees

Either in real-time or on a regular basis, record outgoing transactions and their descriptions in your register. Also known as debits, these may include written checks, fees, online or in-store debit card purchases, peer-to-peer payments (i.e. Venmo) and automatic or recurring payments. Subtract these from your balance and write down the new balance.

5. Check your statement

You’ve reached the end of the month with your bank statement in hand or eStatement on screen. Open the statement — which is essentially the bank’s version of your checkbook register. Use it to ensure every transaction in your log (including pending payments) matches your statement. Mark the ones that don’t.

6. Investigate mismatched numbers

If your ending balance matches the bank’s, you have a balanced checkbook. Good job! Draw a line across the register and mark the date and balance. This way, you’ll know when a new set of transactions begin.

If numbers aren’t adding up, look back and find discrepancies. Make sure you didn’t record anything incorrectly, duplicate entries or include anything after the statement date. Perhaps there’s something that hasn’t been posted to your account yet. Double check with your bank about any pending or outstanding transactions or anything overlooked.

Tip: Balancing your checkbook helps you catch banking mistakes in time to have them resolved. You typically have 60 days to inform the bank of any error.

Balancing a checkbook online

If you’re not the type to keep a manual record of your account activity, at least keep up with your account through online and mobile banking apps. Log in regularly to view your account balance, deposits and withdrawals (including those that are pending or recurring). Keep in mind that your available balance may not be what is currently showing in your account.

Or, instead of doing all that mental math, consider a budgeting app, like Mint, Wally or You Need a Budget (YNAB). These apps help you track your spending, create a budget and stick to it and essentially act as your checkbook register. But they’re not perfect either. Some may have data synchronization issues or may not track your investments.

Frequently asked questions

Balancing your checkbook means comparing your personally recorded transactions (deposits and withdrawals) against your bank’s monthly statement. This helps catch errors, overspending or fraudulent activity.

It can be, if you prefer more financial awareness. Balancing your checkbook helps you track your spending, identify where you can save, catch costly mistakes and keep you aware of your true balance so you don’t overdraft or write a check that bounces.

It’s good practice to balance your checkbook every month within a few days of receiving your monthly bank statement.