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Ask the expert: Balancing an online checking account

| MoneyRates.com Senior Financial Analyst, CFA
min read

Q: Here's the argument I'm having with a friend: We both use electronic checking accounts, but he still keeps a manual checkbook which he balances occasionally against the online record. I say that the whole point of online banking is so you don't have to keep manual records--in effect, the online record is the new checkbook. Which one of us is right?

A: An online checking account can be a convenience, but the online record is not the new checkbook. You should keep a separate set of records for your checking account--whether it is a traditional checkbook or an app on an electronic device--and compare your record against the bank's record regularly. Here are four reasons why:

  1. To watch for new fees. Bank fee structures are changing all the time. Notices of new fees can be easy to miss, but they will stand out clearly when you balance your account.
  2. Because banks make mistakes. Banks are pretty efficient, but not perfect. Transactions get posted to the wrong account, erroneous fees get charged--all kinds of isolated mistakes occur. Think of comparing the bank's record to yours as a form of quality control for your checking account.
  3. To make sure your deposits have cleared. Many overdrafts occur because the customer thinks a deposit has been recorded when it has not. Whether a check has bounced or clearance has been delayed, you need to know.
  4. To guard against identity theft. The Federal Trade Commission estimates that as many as 10 million Americans are victimized by some form of identity theft each year. Balancing your checkbook is a good way to spot unauthorized transactions in your checking account.

If anything, an online checking account should be a way of keeping your records more up-to-date, instead of an excuse for not updating them at all.

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Richard Barrington:
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1 Comment
Kim Wilson 31 May 2012 at 8:48 pm

Good response. I would add another reason for keeping close watch on the on-line account info. I use my debit card a lot, and, while I try to write down every transaction, just as I would each check I write, I occasionally forget. Checking my account on-line every day or two helps me to correct errors or omissions quickly, so that my check register is always pretty accurate. I used to overdraw my account a lot because I didn't check my online information often enough. I've been doing much better since I've begun checking more frequently!