Know the 4 Key Steps to Balancing Your Checkbook

6 Min Read | Last updated: August 9, 2024

A woman sits on a couch, focused on reading a document about balancing her checkbook effectively.

This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

Balancing a checkbook gets easier the more you do it. Learn the purpose of balancing your checking account, why it’s important, and how to do it correctly.

At-A-Glance

Balancing a checkbook may help you better understand how you manage your money.
Technology makes it easier than ever to monitor your transactions on a regular basis.
Whether you handwrite your transactions or track them digitally, the steps to balancing your checking account are similar.

Growing up, you likely overheard your parents and other elders talking about balancing their checkbook. And you may even remember being taught in grade school how to write a check — with an indelible pen, on paper!

Through the rise of technology and online banking, a handwritten register of debits and credits may seem like something out of the days of cassette Walkmans and the blinking “12:00” on a VCR.

But the guiding principles of balancing a checkbook remain true, whether you do your money math online or on paper.

What Does It Mean to Balance a Checkbook?

To balance your checkbook, you keep a record of all your deposits or debits — such as paychecks, cash, direct deposits, and online transfers — and all your withdrawals or credits, such as purchases, checks written, ATM withdrawals, and ATM or other bank fees.

Also called “reconciling your account,” the process involves tracking your credits and debits to ensure that the amount of money listed in your register matches what’s on your banking statement.¹

High Yield Savings Account. Whatever you save for, save more. Terms Apply. American Express National Bank, Member FDIC. Click to open an account.

What’s the Purpose of Balancing Your Checking Account?

Keeping a balanced checkbook lets you know exactly how much money you have in your account at any given time. This could possibly help you stay on top of your finances — from meeting savings goals to tracking your budget — and it may help you guard against bounced checks or overdraft fees. (According to the Consumer Financial Protection Bureau [CFPB], U.S. banks collected an estimated $5.83 billion in overdraft and non-sufficient funds fees in 2023, though some banks have since changed how they charge their account holders for such things.)²

To be more specific, checks take time to clear, whether sent online or in the mail. Knowing that you should record those checks as you write them might help prevent cash flow issues later. For example, say you wrote a check to pay rent on Monday. Now it’s Wednesday night, and you’re ready to go out for a weekly dinner with friends. If you forgot to record the rent payment on Monday, you might have to scrimp ’til payday because you unintentionally strained your budget.

Balancing your checkbook also helps catch any bank errors, merchant errors, and fraudulent charges.³

4 Steps to Balancing a Checkbook

There are three ways most people use to reconcile their checking account on a regular basis, based on what fits their comfort level best:

Writing it all down in a register supplied by your bank or credit union
Using a spreadsheet
Relying on your banking institution’s online website or app to do it for you and double-checking for accuracy

Regardless of your method of choice, the following four steps should help you balance your books:

Record your transactions. This includes all deposits, withdrawals, bank fees, and any interest earned. Record them as they occur — this means accounting for debits that haven’t yet cleared or credits that haven’t officially arrived in your checking account yet. If withdrawing cash from an ATM that charges withdrawal fees, be sure to record those fees, as well as any fees your bank levies for using an out-of-network or foreign ATM. If you’re tracking everything digitally, check your account activity regularly, taking note of all transactions.
Review the monthly statement from your bank. Whether your method is old school or new school, take the time to look over your monthly statement. Compare the debits and credits from the statement with what you have tracked, and be on the lookout for forgotten payments (such as bills you set up on autopay) and any fees incurred. If the balances match, congrats, you did it correctly.
Address any errors. If the balances don’t match up correctly, it’s time to troubleshoot. But first, it might be a good idea to take a short break to clear your head and rest your eyes. Fatigue is real, and focusing on numbers, whether handwritten or displayed on a screen, for an extended length of time might cause us to spot errors that may not actually be there. Once you return to the task, re-review any red flags you initially found.
Denote your last point of balance. Make it a point to demarcate your most recent mark of balance in your register. If you go the pen-and-paper route, or even if you use your own spreadsheet, shade in one of the entry lines in your register to indicate that last point of balance. This way, you have a clear and distinct starting point for the next time. The most straightforward way to discover errors is to go back to the last time your account was balanced and work forward from there. If you do it all online, take a screenshot of that point or write down the date and account balance on a separate sheet of paper.

The Takeaway

Balancing your checkbook by pen and paper may seem antiquated nowadays. But the principles of knowing how and why to regularly reconcile your checking account, however you may do it, could provide a better sense of money management and good personal finance habits.

¹ “How to Reconcile Your Bank Statements,” Experian

² “Overdraft/NSF Revenue in 2023 down more than 50% versus pre-pandemic levels, saving consumers over $6 billion annually,” Consumer Financial Protection Bureau

³ “How to Reconcile Your Bank Statements,” Experian

SHARE

Michael Grace is a personal finance and technology freelance writer based in New York.

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.

Woman sitting at a table writing on a paper

What Is a Cashier’s Check?

Cashier’s checks work because banks are obligated to hold funds to pay the check until it’s cashed. That’s why cashier’s checks are preferred for many large transactions.

A woman seated on a couch, intently focused on her phone, exploring information about Health Savings Accounts.

What Is a Health Savings Account?

Health Savings Accounts can help you save money on medical costs and be used for long-term tax-free savings – as long as you have a high deductible health plan.

Woman is taking a picture of a check that lays on the counter in the coffee shop

How to Write a Check in 6 Easy Steps

At a time with many digital payment options, some people aren’t sure how to write a check. Follow these steps to help you write personal checks properly.

The material made available for you on this website, Credit Intel, is for informational purposes only and intended for U.S. residents and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.