Can You Trust the Balance You Get at the ATM?
You cannot trust the balance that the ATM gives you. The banking system operates on a system of holds while money is transferred from your account to other places. Your deposits may not be immediately available to you. Even your debits are not automatically deducted from your checking account. For this reason, it is important to keep a running balance of your account at all times.
Understand How Deposits Are Credited
When you make a deposit, the bank gives you credit for the deposit, but the check is sent to a clearinghouse.
The clearinghouse is regional, and if the check is from out of state it may need to be sent to another clearinghouse before the bank actually receives the money for your check. When you deposit a large check from out of state the bank may put a hold on it until funds are collected. This protects you from spending the money before you actually get it. Sometimes the check will not clear and you will need to pay the bank back if you have already spent the money. You can avoid a hold by changing some transaction that you do.
Checks Do Not Clear Your Account Immediately
Similarly, checks do not clear your account the moment that you write them and send them off in the mail. Once the person or company receives your check, they must deposit it in their bank and then wait for the money to be transferred from your account. Checks usually take the longest to clear, because it depends on how long the company takes to cash or deposit your check.
You may have outstanding checks for more than a month. You need to keep track of them so that you know when they clear your account.
Debits and Deductions Do Not Always Show Up Right Away
Debits are not automatically deducted from your account. When you first use your debit card a hold is placed on your account.
This hold lasts a few days, and then will drop off. The merchant that accepted your debit card has to send in its transactions in order for the debits to be transferred to them. Although most merchants do this on a daily basis, some small businesses may take longer. When this happens the hold may drop off before the amount is deducted from your account, and your balance would say that you have more than you do. If you do not keep track of your actual transactions, you can end up overdrawing your account.
Understanding Your Actual Balance
Since you have all of these factors working against you, you should keep a running balance of your account. You cannot simply trust the ATM balance to be the correct one. Similarly just because a debit transaction goes through, it does not mean that you currently have the money to cover the transaction. To keep a running balance you simply record your transactions as you go, then you add and subtract them from your balance in order to get the amount that you really have.
If you do not keep a running balance, you may end up overdrawing your account and owing frees to both your bank and merchants. If you switch primarily to cash for your budget, you will not need to worry about your account as much, but you should still keep a running balance of your account so that you do not take out money from your account that you need to cover your bills.
Once you begin tracking your balance, you will better be able to monitor your spending and stick to your budget.