What’s the purpose of balancing or monitoring your checking account?

What’s the purpose of balancing or monitoring your checking account– A checking account is a type of bank account that allows individuals to deposit and withdraw money, make payments, and manage their day-to-day financial transactions. It provides a convenient and secure way to store and access funds, offering features such as check writing, debit card usage, and online banking.

Balancing or monitoring your checking account is a crucial aspect of financial management. They play a significant role in maintaining financial stability and promoting responsible money management. We will discuss what’s the purpose of balancing or monitoring your checking account.

Balancing or monitoring your checking account provides you with a comprehensive understanding of your financial situation, allowing you to make informed decisions, avoid overspending, and protect yourself against financial risks. By practising these habits, you can achieve financial stability, pursue your financial goals, and maintain control over your personal finances.

Why Tracking Expenses and Balancing Your Checking Account Are Important

1. Ensures financial stability and prevents overspending

One of the primary reasons for tracking expenses and balancing your checking account is to maintain financial stability. By monitoring your income and expenditures, you gain a clear picture of your financial situation. This knowledge allows you to make informed decisions about your spending habits and ensure that you are not spending more than you can afford.

Balancing your checking account ensures that the money you think you have matches the actual funds available in your account. It helps you avoid overdrawing your account, which can result in costly overdraft fees and potential damage to your credit score. By regularly reconciling your transactions, you can catch any discrepancies or errors, such as unauthorized charges or incorrect amounts, and rectify them promptly.

2. Helps identify and eliminate unnecessary expenses

Tracking expenses enables you to identify areas where you may be overspending or wasting money. By categorizing your expenses and analyzing them, you can pinpoint patterns and identify unnecessary or frivolous expenditures. This information empowers you to make conscious choices about your spending and find ways to cut back or eliminate unnecessary expenses.

For example, by tracking your monthly subscriptions or discretionary purchases, you might realize that you’re spending a significant amount on services or products that you don’t truly need. This awareness allows you to make adjustments, cancel unnecessary subscriptions, and redirect those funds towards more essential financial goals, such as paying off debt or saving for the future.

3. Facilitates budgeting and financial goal-setting

Tracking expenses and balancing your checking account are essential components of effective budgeting and financial goal-setting. By understanding your income, expenses, and available funds, you can create a realistic budget that aligns with your financial objectives.

With accurate tracking, you can allocate funds towards specific goals, such as saving for a down payment, paying off student loans, or building an emergency fund. By monitoring your checking account balance and reconciling your transactions, you can stay on track with your budget, make necessary adjustments as circumstances change, and ensure that you’re progressing towards your financial goals.

The Purpose of Balancing or Monitoring Your Checking Account

Balancing or monitoring your checking account serves several essential purposes that contribute to your financial well-being. Now, What’s the purpose of balancing or monitoring your checking account?

1. Detecting Errors and Fraud

By reconciling your checking account, you can identify any mistakes or discrepancies in your records or fraudulent activities that may have gone unnoticed. Regular monitoring enables you to catch unauthorized transactions and take immediate action to protect your funds.

2. Tracking Bank Fees

Balancing your account helps you stay aware of the fees associated with your banking services. By carefully reviewing your transactions, you can identify any hidden or excessive fees, prompting you to consider alternative accounts with lower charges or negotiate fee waivers.

3. Keeping Track of Spending

Balancing your checking account forces you to review and categorize every transaction, allowing you to gain a comprehensive understanding of your spending habits. This insight helps you identify areas of overspending and make informed decisions to cut back and prioritize your financial goals.

4. Catching Bank Mistakes

While rare, banks can make errors that may go unnoticed without regular monitoring. Balancing your account allows you to promptly identify and rectify any mistakes made by your bank, ensuring that your account reflects accurate information.

5. Staying Up-to-Date on Automatic Payments

Regularly reviewing your account transactions ensures you remain informed about all your automatic payments and subscriptions. This awareness enables you to make necessary adjustments, cancel unused services, and allocate your funds more effectively.

6. Avoiding Overdraft Fees and Penalties

By monitoring your account balance closely, you can prevent overdrawing your account and incurring costly overdraft fees and penalties. This practice helps you maintain a positive account balance and avoid unnecessary financial setbacks.

7. Staying on Top of Financial Obligations

Balancing or monitoring your checking account ensures that you stay aware of your financial obligations and deadlines. It helps you remember upcoming bills, loan payments, or other financial commitments, preventing missed payments and potential penalties.

8. Building a Stronger Financial Foundation

By actively monitoring your checking account, you develop a habit of financial responsibility and discipline. This practice empowers you to make informed decisions, prioritize your expenses, and work towards building a stronger financial foundation for yourself or your family.

9. Planning for the Future

Balancing or monitoring your checking account goes beyond the present moment. It allows you to assess your financial situation, evaluate your spending patterns, and make necessary adjustments to align with your long-term goals. Whether it’s saving for a down payment on a home, funding your children’s education, or preparing for retirement, regularly reviewing your account helps you stay on track with your financial aspirations.

10. Peace of Mind

One of the greatest benefits of balancing or monitoring your checking account is the peace of mind it brings. You gain a sense of control over your finances, knowing that you are actively managing your money and ensuring its accuracy and safety. This peace of mind translates into reduced financial stress and greater overall well-being.

The Process of Balancing Your Account

To ensure the accuracy of your checking account and reconcile any discrepancies, you can follow these steps to balance your account effectively:

1. Gather necessary materials

Most recent bank statement (mailed or printed from your online account)
Check register
Calculator
Optional: Templates, spreadsheets, or accounting software for electronic calculations

2. Assess your balance

Begin by writing down the bank balance indicated on your most recent statement. This represents the month-end account balance shown by your bank.
You can check your account balance through various channels such as online banking, mobile apps, ATMs, phone banking, or text services.

3. Compare your check register to your statement

Thoroughly review your check register entries and compare them to the transactions listed on your bank statement.
Place a checkmark next to matching items on both the bank statement and the check register.
Ensure that all transactions, including debit card charges, paper checks, cash withdrawals, ATM fees, overdraft fees, and interest earned, are accounted for on both documents.
If you notice any missing transactions in your check register, add them (if legitimate) or make a note to inquire about them with your bank (if suspicious or unfamiliar).

4. Find outstanding transactions

Identify outstanding withdrawals by looking for transactions in your check register that do not have a checkmark next to them.
These transactions typically consist of outstanding checks, which are checks you have written but have not been deposited by the recipients yet.
Add the values of outstanding withdrawals to your total withdrawals.
Make a list of deposits that you have made but have not yet appeared on the bank statement, such as direct deposits from your payroll or mailed deposits.
Add the values of these deposits to your total deposits.

Run the numbers

At this point, you will have several numbers on your sheet of paper.
Use your calculator to perform the following calculations:
- Start with zero.
- Add the “Bank Balance.”
- Add the “Deposits.”
- Subtract the “Withdrawals.”
- The result should match the exact amount shown in your check register.

6. Fix mistakes and problems

If the numbers do not match, it is essential to investigate and identify the discrepancies.
Check for common errors such as arithmetic mistakes, missed fees or interest payments, listing an item twice, or transposed numbers.
Once you have resolved any mistakes or identified the cause of the discrepancy, adjust your check register accordingly.
If you suspect fraud or encounter a bank error, promptly contact your bank to address and contest the problematic transaction.

How to Monitor Your Checking Account Balance

1. Regularly reviewing account activity and transactions

Monitoring your checking account balance is an essential practice to stay on top of your financial situation and ensure the accuracy of your account. Here are some steps to effectively monitor your checking account balance:

Set a regular schedule: Designate specific intervals for reviewing your account activity. This could be weekly, biweekly, or monthly, depending on your preferences and financial habits. Consistency is key to staying organized and detecting any discrepancies promptly.
Review transactions: Carefully examine the transactions listed in your account statement or online banking portal. Verify that each transaction is familiar and legitimate. Look for any unauthorized charges, errors, or suspicious activity. If you notice anything unusual, contact your bank immediately to address the issue.
Check for accuracy: Compare the transactions in your account statement or online portal with your own records, such as your check register or digital transaction history. Ensure that the amounts, dates, and descriptions match. This process helps identify any discrepancies or errors that may need to be resolved.
Reconcile your account: Regularly reconcile your checking account by comparing your recorded transactions with the ones provided by your bank. This ensures that your records align with the bank’s records, and any discrepancies can be resolved promptly. Balancing your account is crucial to maintain an accurate representation of your available funds.

2. Setting up account alerts and notifications

To enhance your ability to monitor your checking account balance, take advantage of the account alert and notification features provided by your bank. These features help you stay informed about your account activity in real-time.

Choose relevant alerts: Banks offer a variety of alerts that you can customize based on your preferences. Opt for alerts that notify you of important activities, such as low balances, large transactions, deposits, withdrawals, or suspicious activity. Select alerts that align with your financial priorities and concerns.
Opt for multiple notification channels: Banks provide various channels through which you can receive alerts and notifications. These may include email, text messages, push notifications through a mobile app, or even phone calls. Select the channels that are most convenient for you and ensure that you are consistently monitoring them.
Set appropriate thresholds: Determine the thresholds at which you want to be notified. For example, you can set an alert to notify you when your account balance falls below a certain amount. This helps you avoid potential overdrafts and ensures that you have enough funds for your financial obligations.
Regularly update preferences: As your financial circumstances change, review and update your account alert preferences accordingly. Adjusting your alerts ensures that you continue to receive relevant and timely notifications based on your evolving needs.

How to Check Your Checking Account Balance Online

Checking your account balance online offers convenience and real-time access to your financial information. Here are several methods you can use to check your checking account balance online:

1. Bank’s website:

Visit your bank’s online banking website using any internet-connected device.
Log in to your account using your username and password.
Navigate to the account balance section, typically found under “accounts” or “account information.”
Click on your specific checking account to view the balance and transaction history.
Most online banking websites provide a clear overview of your account balance and recent transactions.

2. Mobile banking app

Download your bank’s mobile banking app from the app store or your bank’s website.
Sign in to your account using your login credentials.
Locate the account information section within the app.
View your checking account balance and recent transactions on the app.
Mobile banking apps often offer real-time updates on your account balance.

3. ATM

Insert your debit or ATM card into an ATM machine.
Enter your Personal Identification Number (PIN).
Select the option for “balance inquiry” or a similar option on the ATM screen.
Your checking account balance, along with recent transactions, will be displayed.

Note: Be aware that using an out-of-network ATM may incur fees for checking your balance or conducting other transactions. To avoid such fees, consider using ATMs within your bank’s network or inquire if your bank offers ATM fee refunds.

4. Over Your Phone

Contact your bank’s customer service phone number.
Follow the prompts from the automated voice system to access your account balance.
Enter your account number and any other required identifying information.
Answer security questions if prompted.
Your account balance will be provided over the phone.

5. Bank statements

Review your monthly bank statements sent by mail or access electronic statements online.
Bank statements provide a comprehensive overview of your account activity, including your account balance.
Your balance will be listed on the statement, along with all transactions made during the statement period.

Ensuring Accuracy and Safety of Your Accounts

Keeping your checking account secure and accurate is crucial for maintaining your financial well-being. Here are some important steps you can take to ensure the accuracy and safety of your accounts:

1. Choosing strong and unique passwords

Create a strong password: Use a combination of uppercase and lowercase letters, numbers, and special characters to create a password that is difficult to guess. Avoid using easily guessable information, such as birthdays or names.
Use a unique password: Ensure that each of your online accounts, including your checking account, has a unique password. Using the same password for multiple accounts increases the risk of unauthorized access if one account is compromised.
Regularly update your passwords: Change your passwords periodically to maintain security. Consider updating them every few months or whenever there is a potential security breach.

2. Enabling multi-factor authentication

Enable two-factor authentication (2FA): Two-factor authentication adds an extra layer of security by requiring you to provide an additional verification method, such as a unique code sent to your mobile device, in addition to your password. Enable this feature for your online banking account to protect against unauthorized access.
Biometric authentication: Some banking apps and websites offer biometric authentication options, such as fingerprint or facial recognition. Enable these features if available, as they provide an added level of security.

3. Regularly monitoring account activity

Review your account statements: Carefully review your monthly bank statements or access electronic statements online. Check for any unauthorized transactions or suspicious activity. If you identify any discrepancies, contact your bank immediately.
Set up account alerts: Utilize account alert features provided by your bank to receive notifications about account activity, such as large transactions or low balances. These alerts can help you quickly identify any fraudulent or unauthorized transactions.
Monitor online and mobile banking activity: Regularly check your online and mobile banking transactions to ensure they align with your records. Report any suspicious activity to your bank as soon as possible.
Keep your contact information up to date: Ensure that your bank has your current phone number and email address on file. This allows them to reach you promptly if they detect any unusual activity on your account.

The Disadvantages of Not Keeping Money in a Bank

While some individuals may choose not to keep their money in a bank, there are several significant disadvantages to consider. Here are two key drawbacks of not utilizing banking services:

Vulnerability to theft: Storing large amounts of cash outside of a bank puts you at a higher risk of theft. Cash can be easily stolen or misplaced, and the loss may be irrecoverable without the protection offered by a bank.
Lack of deposit insurance: Most banks are members of deposit insurance programs that provide protection for customers’ deposits in case of bank failure. Without keeping money in a bank, you may not benefit from this protection, making your funds more susceptible to loss.
Reduced financial security: Keeping money in a bank offers greater security compared to storing it at home. Banks have extensive security measures in place, including surveillance systems, alarms, and vaults, to protect your funds.
Limited payment options: Not having a bank account can limit your ability to make electronic payments, write checks, or use online payment platforms. This can make financial transactions more challenging and less convenient.
Lack of interest earnings: Banks offer interest on savings accounts, allowing your money to grow over time. By not utilizing a bank account, you miss out on the opportunity to earn interest on your savings.
Difficulties with financial management: Banks provide various tools and resources to help you manage your finances effectively. These include online banking platforms, budgeting tools, and access to financial advisors. Without access to these services, it can be more challenging to track expenses, create budgets, and plan for the future.
Limited access to credit: Establishing a banking relationship is often a prerequisite for obtaining credit, such as loans or credit cards. Without a bank account, you may face difficulties in accessing credit options and building a credit history.

Fees to Avoid by Reviewing Your Checking Account Statement

Reviewing your checking account statement regularly is crucial for identifying any fees that may have been charged to your account. By staying vigilant, you can take proactive measures to avoid unnecessary fees. Here are three common fees to watch out for:

1. Overdraft fees

Overdraft fees are charged when you make a transaction that exceeds the available balance in your account.

To avoid overdraft fees, carefully track your spending and ensure you have sufficient funds in your account before making purchases or payments.

Regularly reviewing your checking account statement helps you identify any instances where you may have incurred overdraft fees due to a lack of available funds.

2. Insufficient funds fees

Insufficient funds fees, also known as non-sufficient funds (NSF) fees, occur when you attempt to make a payment or transaction, but there are not enough funds in your account to cover it.

It is crucial to monitor your account balance and ensure you have enough funds to cover any scheduled payments or transactions.

By reviewing your checking account statement, you can identify any instances where insufficient funds fees have been charged and take steps to avoid them in the future.

3. Monthly maintenance fees

Some checking accounts have monthly maintenance fees associated with them.

These fees are typically charged if your account balance falls below a certain threshold or if you do not meet specific account requirements, such as a minimum number of transactions.

By reviewing your checking account statement, you can assess whether you are being charged monthly maintenance fees and evaluate if there are ways to avoid or reduce these fees, such as maintaining a higher balance or meeting the account requirements.

Conclusion

Balancing and monitoring your checking account is crucial for financial stability. It ensures accuracy, prevents overspending, and identifies unnecessary expenses. By regularly tracking expenses, reconciling transactions, and reviewing account statements, you take control of your personal finances. Accessing your account balance online offers convenience, while ensuring accuracy and safety involves strong passwords, multi-factor authentication, and monitoring activity. Not keeping money in a bank increases the risk of theft or loss and limits access to banking services. Reviewing your account statement helps avoid fees like overdraft and insufficient funds fees. Take control of your finances, maintain stability, and pave the way for a prosperous future.