Mar 7 2012
It’s the age of technology, and many people aren’t writing checks, but swiping plastic and checking their balance online. Keeping a paper register or it’s online equivalent is still important so you know what’s going in and out of your account so you don’t overdraft. Checking your balance online only gives you what’s already posted to your account, not what’s in limbo. Keep the following things in mind when balancing your checking account in the digital age.
Consider the Money Gone
Judge Judy once told a defendant that when you write a check out to someone, the law regards this as an “implied contract”. When you make a payment to a third party, whether its by check, debit card, or an online bill payment, you should consider that money immediately gone from your account to avoid over drafting. Every transaction takes a few days to process and come out of your account, but don’t rely on what your available balance online says you have. Many people forget to take into consideration all of their outstanding transactions that haven’t hit their account yet, which can give them false promise of funds that aren’t really theirs anymore. This is how many people get into the trap of over drafting their account.
Those Pesky Outstanding Transactions
To figure out your actual balance, deduct all your outstanding transactions off your available balance. An outstanding transaction is a payment that is in limbo; it hasn’t been processed yet, but has been committed, or paid out. Remember, when you pay someone, consider that money gone! Transactions can take a few days to process, so don’t get caught in the trap of thinking you have more money in your account than you actually do. Just like when you deposit a check into your account, it’s not available to you right away The same holds true for when you deduct funds from your account.
Let’s say you have a current and available balance of $2,000.00. Here is a checklist of what you should ask yourself:
1. Do you have all of your debit card receipts?
2. Did you pay any bills?
3. Did you write out any checks?
4. Did you withdraw money out of an ATM? Were there any fees?
5. Was a monthly service charge assessed? If so, how much was it and when does it get posted? Can we avoid paying this all together?
6. Did any automatic monthly payments come out? Learn when and how much these are for and make sure to have that in your account to cover it.
7. Did you order a book of checks? If so, what was the charge?
8. Are there any miscellaneous charges from the bank or a merchant?
How to Calculate Your Balance
If all of the transactions from your checklist are already posted to your account, then yes, the balance you see online that says $2,000.00 is correct. But if there are any outstanding transactions that haven’t hit your account yet, that isn’t your actual balance. If you wrote a check out for $1,500.00 that someone hasn’t cashed yet, your balance is only $500.00, even though your account shows that you have $2,000.
What Can You Do?
So how can you avoid over drafting your account? One way is to keep a cushion of money in your account so you don’t have to worry about doing math all the time. Another way is to set up high and low balance alerts and take action immediately to fund your account if your balance gets too low. The best way is to keep track of all your transactions as they happen on your computer using a spreadsheet or program, or a paper register booklet. If you keep a running tab and deduct your payments out immediately, you’ll know how much is in your account at all times.
Keeping track of all your transactions can be tough, but bouncing checks and paying fees can be even worse. Make sure you are always accounting for items that you’ve committed to pay for, even though they’re not posted to your account yet. Don’t rely only on your available balance because that number isn’t showing all the pending transactions that haven’t posted. Do you have any tips you can share for keeping track of all your transactions in the digital age?