Is it Still Necessary to Balance Your Checkbook?

With the development of advanced technology that permits employers to pay people via direct deposits and undermines the need to write checks, balancing one’s checkbook has slowly become obsolete. After all, the number of individuals who have moved on from writing checks by far outweighs those who still use them. So, is it really necessary to balance a checkbook in 2019? The answer is yes.

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What Does “Balancing a Checkbook” Mean?

Before explaining how modern checkbook balancing should be done, it is important to understand the underlying objective of the process as well as how it works. First, the goal is to ensure that the bank reports the correct balance of the user’s account. That way, any under/overstatements will be detected and corrected in a timely manner. As far as the process to accomplish this goes, it is quite simple and revolves around nothing more than doing some basic algebra. The user basically adds all of their deposits and subtracts all of their withdrawals from the last month’s ending balance. Then, they compare that number with the current ending balance reported by the bank on the most recent statement. If the two do not match, they can track outstanding checks or deposits in transit alongside any book/bank errors to determine the cause of the discrepancy. In case that the difference remains unexplained, they can bring it up to the bank and request a further investigation to avoid perpetual problems.

Checks Becoming Obsolete

Balancing a checkbook became popular as soon as people began using checkbooks to pay for things. The reason why is that there was always a delay between the moment that a check is written and the moment when the receiver of the check deposits it to their bank. So, someone who pays for something today could end up getting the money taken out of their account sometime week, per se. Thus, that hypothetical one-week delay period would represent an inherent risk of misstatements, especially if it takes place during the month’s cutoff. As technology advanced, however, debit and credit cards brought down this delay to just a few seconds. For instance, someone who swipes their card to pay will immediately have the money withdrawn from their account. In other words, the inherent risk due to timing problems became borderline nonexistent. Does this mean that balancing a checkbook is also not required anymore? Not exactly.

Reconciliation Means Balancing

While balancing a checkbook is certainly not required for someone who never writes checks, it is important that everyone does some form of reconciliation. In fact, reconciliation a bank account has slowly become the new form of balancing a checkbook in a way that is appropriate for the 21st century. According to The Balance, the process is fairly similar as people just have to analyze their banking statement and cross-reference it with any outliers such as deposits yet to be received or checks not charged. As said, however, electronic deposits and debit cards have practically eliminated the delays related to both of the aforementioned.

Nonetheless, understanding that there is always some risk of becoming a victim to banking errors is enough to incentivize one to complete an occasional reconciliation. After all, while the actual act of balancing a checkbook has become obsolete, the idea of practicing safe banking should still be prioritized.