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Checking accounts: balancing your checkbook and avoiding overdraft charges


Seeing the monthly bank statement in the mailbox is enough to cause anyone’s blood pressure to rise. Balancing a checkbook can be very frustrating to say the least. It would be very easy to bypass balancing the checkbook each month, but chances are a mistake would go unnoticed – until overdraft notices start to arrive. Besides being charged by your bank, you would no doubt be charged by the merchants who accepted your checks. If several checks bounce, you could be hit with hefty service charges and fines. Many banks charge a standard rate of $20.00 per bounced check. Businesses often charge just as much. Don’t let this happen to you. Balancing your checkbook and avoiding overdraft charges is easier than you might think. You will have peace of mind as well as an accurate account of your finances.
Get out a calculator, and begin balancing your checkbook by taking note of the closing balance on the front of your bank statement. There is usually a worksheet on the back of the first page of the bank statement. If not, write the figures on a piece of paper.

Next, compare your bank statement to your checkbook, and enter any deposits you made that do not appear on the statement. It is also a good idea to go over the deposits you have been credited for, and make sure the figures were entered correctly. Always save deposit slips as a reference in case your records don’t match the bank’s records. Banks do make mistakes. It’s helpful to use a highlighter to mark over the amounts you have verified as being correct. Add the deposits not credited on the statement to the closing balance listed on the first page. Calculate the total, and write this figure on paper as well.
Now you need to compare your bank statement to your checkbook record to find out which checks and debits are outstanding. Write down the amounts of the checks and debits, and add these figures together. Subtract the figure you arrive at from the first total you attained, by adding the deposits not credited to the closing statement balance. Don’t forget to write in and subtract any service charges or bank fees in your checkbook record. Also, be sure you subtracted all ATM (automatic teller machine) transactions. The balance you calculate should match the balance in your checkbook record. If it doesn’t, you will need to compare the check amounts and debits to the amounts on the statement.

To avoid having to go over the statement and checkbook after doing final calculations, it’s a good idea to go over the amounts in advance. This is especially true if you have numerous debits and deposits each month. The more transactions you have, the more margin for error. An easy way to do this is with a highlighting marker. Match the check amounts to the debits in your checkbook record, and highlight the ones that are correct. Circle the ones that don’t match, and make corrections and notations explaining each one in the checkbook record. If mistakes were found, calculate a new total. If there are no further mistakes, the figure you calculate should now match the final figure in your checkbook record. If it does not, you will need to subtract all debits and add all deposits in your checkbook record. Many times the numbers don’t match because of miscalculations.

To protect yourself from expensive overdraft charges, ask if your bank offers a personal line of credit to protect your checking account. This is a versatile tool that will give you power over your finances. Not only will it protect you from overdraft charges, you will be able to borrow money when necessary within predetermined credit limit. There is usually a nominal service fee for implementing a check credit advance, as well as the annual percentage rate. On a specified date each month, an automatic payment including interest is paid towards the balance. The balance can be paid at any time to avoid any further interest charges. This is a fantastic way to avoid overdraft charges and protect your good credit. The small fees imposed for using this service is miniscule compared to overdraft charges and bad check charges.

Everyone makes mistakes, but you can avoid problems by signing up for a check credit account, and by balancing your checkbook at least once per month. Doing so will allow you to have control over your finances before they have control over you.