Even with the proliferation of personal financial management tools, there are still folks that have no idea the true amount of cash they have in the bank at any one time. Sometimes putting the pencil to the paper and doing some good old-fashioned math is a better way to to make sure your bank account is reconciled and you are not being taken for a ride by your bank.
The going trend
Many people may be writing down transactions in their checkbook but they are making a financially fatal mistake by only copying down what their online banking statement provides. While technically you may be able to find bank errors, most people attribute inconsistencies to their own mistakes.
For instance, the bank statement online states you made a debit card purchase for $50 three weeks ago. While you can’t exactly remember making that specific purchase in that particular store, you likely will not question it. You may just fill in another blank space on your check register and move on to the next item.
However, in using backwards reconciliation tactics, you are essentially missing the point of reconciling your checkbook. You are only listening to what the bank is feeding you — and it could be to your own detriment.
What should be happening
While online banking information may seem to make things so easy to balance out your checkbook, you should actually be doing the opposite. You should be writing down each and every transaction you make against your checking or savings account as it happens. Even if you are paying bills electronically, make sure to write an entry for transactions against your bank account. Include the date and the reason for the transaction if you are likely to forget.
When you receive your statement in the mail, you should sit and cross-check your transactions from the bank statement. Examine what the bank says against the information you have already written in your register. This is a great way to identify missed transactions or mistakes you may have made in transposing numbers. While you can use online resources to double-check transactions, don’t rely on them solely to consider your bank book balanced.
Highlight any entries you have questions on so you can remember them for later. While many banks rely on electronic transactions, there is still a margin of human error that can occur. You want to make sure all deposits were accounted for as deposited. Banks have been known to make deposits into another customer’s account. They typically discover their own mistake but you need to remain on alert to protect your own interests. If you frequently make transaction using your debit card for purchases, it may be wise to also keep your payment receipts to ensure the bank has deducted the transaction amount properly. These receipts will be the only way to prove your case in the event you have been overcharged.
Thieves today do not need to physically have your bank card to use it for a transaction. They only need to have the information printed on the card and they can do a lot of damage to your account. If you have ever handed your debit card over to a cashier or used it to pay for dinner in a restaurant (one of many hotspots of debit card fraud), it is possible the worker receiving the card could copy down your details. Of course most workers are reliable and trustworthy but you just can never be sure.
By highlighting the items you question or do not remember, you can identify incidents of fraud quickly and have the resolved within a reasonable time frame. If you are constantly updating your checkbook, you have the notes you need to remember the purpose of your transactions which makes finding mistakes or unauthorized usage easier to identify.
Old school, but financially sound
Keeping a checkbook balanced is part of Personal Finance 101. It should continue to be a skill that is taught to teens and continually practiced by adults. Imagine for just a second that technology fails for a few days. Would you know how to survive? Would you be able to confirm exactly what is available in your bank account? While we may not foresee such a situation where this would happen, the reality is things do happen. You cannot solely rely on electronic banking to maintain your money accurately.
If you put off checkbook reconciliation for too long, get back in the groove of things. Make a point to carry your checkbook and register with you when you make transactions. At the end of the day, update the checkbook. Add in the deposits and subtract the transactions against your account. It will take minutes at the end of the day rather than hours at the end of the month, and chances are much higher that the math will work out.
Debbie is a writer who specializes in parental finances, consumer spending and mortgages.