Checkbook Tricks: Keeping A Tight Rein On Cash


Overdraft fees can can really hurt.


It’s an awful feeling to learn you’ve overdrawn your checking account.  The last thing anyone wants is to pay an unnecessary $20 to $30 bank fee when they’re already short of cash in the first place.  It gets worse when overdrafts occur frequently.  If you averaged only a single overdraft a month, the fees could add up to hundreds of dollars per year!  It’s no accident banks are getting rich.


New Rules


Fortunately, government rules say that banks can no longer sign you up for costly “overdraft protection” without obtaining your preapproval. This means there’s less chance you’ll spend $35 for a $5 hamburger on account of fees.  However, there’s still nothing to prevent the embarrassment or inconvenience you may feel if your debit card is declined at the store and you end up leaving without the items you wanted to purchase.



It’s Easy To Overdraw


The closer your average bank balance is to zero, the more likely you’ll end up overdrawing it.  This isn’t necessarily your fault.  Gas stations and other similar high volume businesses are notorious for “double authorizing” your debit card.  This means they’ll tie up funds you thought you had available to use. We’ll explain how this happens in further detail below.


There are other ways we tend to lose track of our bank balance.  Have you ever noticed the person in front of you at the ATM suddenly walk away empty handed, dismayed that he didn’t have enough money in his account? From unrecorded debit card charges, to online payments, to automatic withdrawals and banking fees, it’s easy to forget to enter things in a checkbook, and hard to keep it balanced.


Now, here’s the good news: The method described below provides a super-fast, easy way to keep your checkbook accurate and know your exact balance at all times.


An Alternative to the Monthly Balance


While it is far better to balance a checkbook each month in the standard, accepted way, few people are doing that anymore. As a result, many of us are getting by without an accurate picture of the money in our checking accounts. Those who can afford to keep a large balance may be okay, but those with smaller balances are overdrawing their accounts at alarming rates.

Avoid costly bank overdraft fees.
Online banking is a great tool for staying on track, but even when you bank online it is still wise to keep a running checkbook balance that is current and accurate. Below, we’ll show you an “Instant Balance” trick that takes only minutes, and lets you know exactly how much money you have available to spend at any time. You will also find two more tips for keeping a checkbook accurate and up to date.


“Start Fresh” and Verify Your Account Balance


To do an “Instant Balance” and find out today’s balance for sure, you will need to start with a correct balance from an earlier date in your check register. If you have never balanced your checkbook before, this may be the hardest step in the whole process.


Did you send a check to your brother?If you know you haven’t listed all charges and deposits in the past, there’s a good chance your check register balance is off.  The best way to figure out your true balance is to stop using your account for a week or two, to make sure all payments and deposits have cleared the bank. Then you can use the balance that the bank says you have in the account. After your account has settled down, call your bank’s automated telephone banking number, and select the option for “account balance”. Write the words “Verified Balance” in the first blank line of your check register. Then, in the far right hand column enter the balance the bank gave you. (Note: if you bank online, you can log into your account to get this figure.)


Now, since we are assuming all old transactions have cleared the bank, make sure all old entries are checked off in the column meant for making check marks. Or better yet, get a new, empty check register, and start it with your “Verified Balance” line.


However, before going on, ask yourself if there are any old, “outstanding” checks of yours still out in the world—for example a gift check you sent your brother several months ago that he still hasn’t cashed yet. If so, be sure to reenter these old checks after your “Verified Balance” line, in case they do get cashed someday. Your balance obtained from the bank does not include such “uncleared” items, so they must be reentered.


Tip: If it is too hard or inconvenient to stop using your account for a while, it may be worth starting from scratch and opening a new checking account.  Ask about potential bank fees before deciding to go this route.


How to “Instant Balance” Your Checkbook


There is a shortcut to balance your checkbook that takes just minutes in most cases. It makes sense to do this every few days, or anytime you want to know exactly how much money is in your account. In order do it, you must have at least one previous verified balance in your check register (see above).


The old standard method that uses a printed bank statement to balance your checkbook is more thorough, but this instant method is the next best thing.  It helps you to feel confident anytime you need to know how much money you have available to spend.   Although we check off transactions here, you can also “double check” them if you do a full monthly balance.


1. Calculate Today’s Checkbook Balance: Take your calculator and compute your current, bottom line balance—that is, how much money should be in your account. To do this, start with your last verified balance you wrote in the checkbook. Subtract all new payments entered since then, and add all new deposits. Write today’s calculated balance in the far right column of the last entry, like this:


Figure out your current balance.

(Click on image to expand.)


2. Call for Your Actual Bank Balance: Call your bank’s telephone banking system (or go into your account online if you have online banking). Select the option for “account balance”. When the computer tells you your balance, compare it to today’s calculated balance (as shown above). If the bank’s balance is different than your checkbook balance, write down the bank’s figure on a piece of scrap paper and skip to step 4.


3. If both balances are equal, YOU ARE DONE: If your checkbook balance agrees with the bank’s balance, this means all entries in your checkbook have cleared the bank. Therefore, your checkbook is in full agreement with the bank. (See below for “A Note About Accounting”.)  Remember, if your checkbook balance doesn’t equal what the bank says, go on to step 4. However if you are done now, make sure to check off every entry in your checkbook, and make two check marks above today’s calculated balance:


Reconcile your checkbook balance to the bank balance.

(Click on image to expand.)


4. If the bank’s balance is different than yours, see if you can match it.


Your balance probably includes “uncleared items” such as checks that are still in the mail, but the bank’s balance does not. Therefore, you need to remove all uncleared items from your balance, to see if you can match the bank. This takes two steps:


a) Identify your cleared and uncleared items


On the telephone banking menu select “hear all recent transactions” (i.e. all transactions that have recently cleared). As each cleared transaction is read to you, check it off in your checkbook. Continue listening and checking off transactions, until you reach transactions that were already checked off before. You will probably notice that certain entries in your checkbook are still unchecked. These are uncleared items. Unless you write a lot of checks, there should be only a few of them.


b) Take the uncleared items out of your balance


This is a shortcut method, so this step is done on a calculator. However, the first time or two it may help you to also write out the calculations on scratch paper. This makes it easier to check your work.


Start at the bottom line balance of your checkbook, and scan upward, making a running total in your calculator, as follows. First, enter the bottom line balance. Now scan upward in the check register, looking for any unchecked item. When you find an uncleared payment such as a check, add it to the total on the calculator. When you find an uncleared deposit (which is rare), subtract it from the total on the calculator. Continue in this way, until you have added or subtracted all of the uncleared items. The final result on your calculator should match the bank’s balance exactly. If so, you are done. If not, go to step 5.


Completing the above step verifies that your balance matches the bank’s, not counting any new, uncleared transactions. This means your checkbook is balanced. Furthermore, as long as each new, uncleared entry has been entered into the checkbook correctly, your bottom line balance is also correct. It tells you exactly how much money you have available to spend.


5. If your balance for cleared items didn’t match the bank’s, find the error.


If you’ve reached this point, your checkbook’s cleared items didn’t match the bank’s cleared items. This means there is an error somewhere in your checkbook. There are many possible reasons for an error:


• Adding or subtracting incorrectly when calculating the balance

• Failing to check off a transaction that has cleared the bank

• Forgetting to enter a debit card payment in the check register

• Forgetting to enter a check in the check register

• Copying the wrong check amount to the check register

• Forgetting to enter an automatic withdrawal in the check register

• Not entering a fee that the bank has charged to the account

• Forgetting to enter a deposit to the account


Finding an error does not need to be hard. Addition and subtraction errors are the most common of all. Try recalculating your final balance, to see if you get the same answer. If your math is correct, the next step is to call the bank once more, and select “hear all recent transactions” again. This time, carefully make sure that (a) every transaction the bank mentions has been listed in your checkbook, and that (b) you have checked it off as cleared.


Dupulicate checks work great.

Duplicate checks can be a lifesaver.

If you forget to enter your checks in the register, ask for “duplicate” checks the next time you reorder. With duplicates, you automatically keep a copy of each check to refer to if needed. Many people have no problem tracking their checks, it’s all those debit card receipts that are the problem.  If you regularly forget to enter debit card payments, try the “Hot Receipt Trick”, below.


Note:  If you still can’t find the reason for an error, it may be due to a “pre-authorization” hold.  Remember our gas station example above?  When you buy something with a debit card, first a hold is placed on some of the money in your account. Later, the actual amount of the purchase is withdrawn from your account, and the hold is removed. While there is a hold on part of your money, you can’t use it—it is locked up and it reduces your “available balance”.  Sometimes a company creates TWO holds for one purchase (this is known as a double authorization), or a company might fail to remove a hold if a purchase is canceled.  As you have probably guessed, this creates problems for balancing your account.


As unfair as it sounds, it can take days for your bank to remove a pre-authorization, and until they do you won’t be able to access all of your funds. To check whether there is a pre-authorization on your account, use the telephone banking menu and select the option to “hear pending transactions”. If there is an extra transaction pending you don’t recognize, there is a good chance it’s a pre-authorization. Any amount held on your account over your actual purchase price won’t become a withdrawal, but while it remains in effect it lowers your available balance. This can explain why your bank account balance doesn’t match your checkbook. Worse, a pre-authorization hold can even lead to an overdraft or insufficient fund warning if you fail to keep track of your balance.


6. If you are unable to find the error in your checkbook, wait for all entries to clear.


It’s best to take as much time as you need to locate an error hidden in your checkbook. However, sometimes this is more trouble than it is worth. If you’re frustrated by an error you can’t locate, wait a day or so until all entries in your checkbook have cleared the bank and you are able to check them all off. If your balance still doesn’t match the bank’s balance, or if the error is small, you might choose to take the bank at its word. If you do this, enter a “correction” line in your checkbook that will add or subtract whatever is needed to make your bottom line balance equal to the bank’s balance. Although this is not considered a good accounting practice, chances are good the bank’s math is correct.


A Note About Accounting:


The “Instant Balance” method we present here is not as thorough as the standard method for balancing a checkbook, and it is not considered a normal accounting practice.  If you run your own small business, it’s always better to stick with the old tried and true methods, or to use accounting software and download your bank transactions every couple of days at a minimum.  However, for those individuals who typically carry small bank account balances this method is far better than doing nothing.


Q:  Why isn’t the instant balance method considered “proper accounting”?

A: Because we aren’t tracking every entry with the proper attention to detail.


For example, there could be two offsetting errors, such as an unauthorized withdrawal of -$100 and a separate math error of +$100 that we make ourselves, so that the bad withdrawal is never noticed. While this is unlikely, it could happen. Therefore, even when you use the instant balance method it pays to check your bank statement each month, and look for odd or unusual withdrawals.


The “Hot Receipt” Trick


Reserve one pocket in your wallet for “hot receipts” only. Hot receipts are debit card receipts you haven’t entered into your checkbook. Whenever you make a debit card purchase, always put the hot receipt in your wallet, and nowhere else. When you get home, make a habit to look in your wallet, take out all hot receipts, and enter them in your checkbook. When you aren’t given a receipt (such as at a gas pump that is out of paper) find a scrap of paper and write down the store, date, and amount on it. Place it in your wallet and use it the same as any other hot receipt.

The “Future Payment” Trick


Suppose it’s the first of the month, and you know there will be an automatic withdrawal on the tenth, for a car payment. How can you make sure you don’t forget to enter the payment in your checkbook? One way is to enter it now as a “future payment”. As you enter it, put brackets around it, to indicate it is only a note. It won’t affect your account balance until you enter it again as an actual payment on the tenth of the month. To remember to enter it on right day, put an asterisk or star next to each balance entry. Carry these marks down the page, until the actual day of the payment. When you see these marks in your checkbook, they will remind you that a future payment is coming up. See the example below to see how it might look in your checkbook.  Also note that the final balance no longer carries the asterisks, since the payment has now been made.


The future payment trick.

(Click on image to expand.)


Although these checkbook tricks may appear a bit intricate at first glance, with a little practice you’ll be surprised to discover how simple and easy they are to master.  Even better, having confidence in your bank balance will avoid costly overdrafts or the embarrassment or inconvenience of running up against insufficient funds in your account.


If you have a favorite tip about banking, why not share it with our readers in the comments below?


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