How to Balance a Checking Account

Balancing a Checking Account: Step-by-Step Guide

Balancing a checking account ensures that the money you think should be in the account is actually there when you need it. It takes just four steps to complete this essential task and rest easier about your finances.

Understand What Balancing a Checking Account Means

When you balance checking accounts, you take stock of the money coming into the account and going out of the account and make sure that the checking account balance is as it should be.

The goals of balancing a checking account are to:

  • Figure out how much money you have for spending
  • Match your records with the bank's records
  • Catch mistakes that can lead to bank charges or identity theft

Reasons to Balance Checking Accounts

Balancing a checking account helps you:

  • Budget for upcoming expenses
  • Avoid bounced checks (and manage overdraft fees)
  • Identify mistakes that you or the bank made (your bank may have lost money or overcharged you, for example)
  • Avoid becoming a victim of identity theft
  • Check to see if you're satisfied with the interest you're earning—or if you could be getting a higher interest rate at another bank

When to Balance Your Checking Account

It's important to balance checking accounts regularly—at least once per statement period. But if you find yourself bouncing checks, you should balance a checking account anytime you're about to spend money from the account (before paying bills or swiping your debit card at a store, for example).

Balance the Checking Account

To get started with balancing a checking account, gather everything you'll need to balance the books.

If you use pen and paper, you'll need the following:

  • Most recent bank statement (The easiest way to get it is to log in to your bank account online—you'll just need your computer and account information.)
  • Check register
  • Calculator (or just use your computer)
  • A blank piece of paper and a writing utensil

There are several templates available to help you manually do the calculations needed to balance checking accounts. If you prefer to do them electronically, you can build a spreadsheet or use basic accounting software.

Assess your Balance

When you start to balance checking accounts, write your month-end account balance from the bank statement on your piece of paper next to the phrase "Bank Balance." You can easily ​check your account balance online, with an app (if your bank has one), at an ATM, by phone, or by text.

Compare your Check Register to your Statement

Look through every item on your check register, and make sure it includes everything from your bank statement. Place a checkmark (on both the bank statement and the check register) next to matching items.

If anything is missing from your check register, add it (unless you think it's a bank mistake, of course, in which case you should contest it). This includes ATM fees, overdraft fees, and interest you've earned. If anything looks funny, write the date and amount at the bottom of your piece of paper so you remember to research it.

Add up all the deposits and withdrawals so you know how much you think you should have.

Find Outstanding Transactions

Next, look through your check register for any transaction that does not have a checkmark next to it. These transactions are items that did not appear on your bank statement.

Most likely, these are outstanding checks. Outstanding checks are checks that you have written to somebody, but they have not deposited (or the outstanding check didn't make it through the banking system by the time your statement was printed).

Add all of the outstanding deposits (direct deposit from your payroll, deposits that you mailed to the bank but which have not yet appeared yet, for example). Write this number on your sheet of paper next to the word "Deposits."

Then add up all outstanding withdrawals (outstanding checks you've written and automatic electronic withdrawals that you know have cleared since the statement was printed, for example). Write this number on your sheet of paper next to the word "Withdrawals."

Run the Numbers

You'll have several numbers on your sheet of paper by this point. Now, run the math.

Using your calculator, perform the following:

  1. Start with zero
  2. Add "Bank Balance"
  3. Add "Deposits"
  4. Subtract "Withdrawals"

The result should be the exact amount your check register shows.

Fix Mistakes and Problems

If the numbers don't match, you'll need to figure out why. If you find fraud or a bank error, contact the bank immediately to contest the problematic transaction—otherwise, you might have to live with the problem.

You're often protected from transactions that you didn't initiate. However, you may need to act fast: the longer you wait, the greater your responsibility becomes. Typically, if you wait more than two months to find and report a problem, you might have to absorb the loss.

Fortunately, errors and fraud are relatively rare. In most cases, the numbers won't match because:

  • You made an arithmetic mistakes
  • You missed a fee or an interest payment
  • You listed an item twice
  • You transposed numbers (345 instead of 354, for example)

Stick to a System that Works

Now that you have balanced your checking account, you'll need to keep it balanced. The key to staying balanced is making it easy on yourself. That means settling on a consistent way to balance checking accounts and hit the ground running when you spot an error.

If you have to spend time every month getting reacquainted with the process and preparing everything, you're less likely to balance your checking account. There's no best way to do this, so figure out which system works for you, whether that's pen and paper or building a spreadsheet using software.

It's also nice to be told about transactions as they occur, which can reduce the amount of time you spend researching them each month. Set up text alerts on your bank account so that know when big electronic withdrawals hit your checking account (they'll be fresh in your mind when it comes time to balance the books). Alerts also make it easier to detect fraud and errors, which can save you time and protect your assets.