Most of us open our first checking account by age 20. But just because we've had one for years, that doesn't mean that we manage it properly.
Sure, more than half (almost 57 percent) of us regularly balance our checkbooks, but that still leaves 43 percent of us who don't. This inattention could carry a price, largely due to fees charged for insufficient funds or a too-low account balance when we lose track of how much money we have.
But it's not hard to get a handle on your account. These seven simple steps can help you keep your checking account under control:
1. Keep good records. The more informed you are about your checking account, the better equipped you'll be to read and analyze your bank statement.
"You have to have something to compare it to in order to know whether it's right or wrong," says Michael Stahl, author of Early to Rise: A Young Person's Guide to Investing.
That means keeping track of account activity. And you do have choices. You can keep a handwritten record of transactions using the register that comes with your checks. Or use a software program, such as Intuit's Quicken or an online version of your favorite financial program. The point is to have a record of every check, deposit and electronic fund transfer that's involved with the account.
2. Open your mail. When the bank statement arrives, open it and put your record keeping to good use.
"Do it right when you get the statement," Stahl says. "Don't wait."
It's better to examine your bank statement sooner than later for two reasons.
First, if there are any mistakes, reporting them to your bank quickly will ensure they get corrected. Banks usually will disavow errors if they are reported more than 60 days after you received the statement.
Second, the fewer days that pass between when the bank issues a statement and when you read it, the more in synch your records will be with the bank's numbers. "It's less confusing and easier to balance your bank statement if you do it as soon as you get it, not three months later," Stahl says.
3. Scan first. If you're pressed for time, you can get away with examining just the account summary, says Susan Zimmerman of the Zimmerman Financial Group in St. Paul, Minn. It's usually listed at the top of the page and it recaps the state of your account: previous balance, deposits and credits, checks and debits, service charges, interest paid and current balance.
"At a bare-bones minimum, look over the summary information and see if the figures are in the ball park," Zimmerman says. For example, you can see if the balance is roughly what you think it should be or whether the amount of withdrawals is way too high. Look for any unusual or unexpected fees.
Keep in mind that bank statements cover a set time period, say from Jan. 18 to Feb. 17, so any checks you've written around or after the closing date won't be on the statement. Ditto any deposits you've made in the meantime.
4. Spend quality time with your account. Scanning's a good first step, but don't stop there.
"Go over the deposits and the checks," says Paula Wegner, vice president of the First Eagle National Bank in Chicago. "Check all checks from your bank statement against your check register. Check off all checks."
Wegner's emphasis on scrutinizing your posted checks is intentional. You need to see whether your payment records match what the bank has.
Most bank statements will give you several ways of doing this. For example, some allow you to see what checks have been posted by including a copy of the check. The advantage: it shows you who the check was written to. Even when canceled checks are part of your statement, your monthly accounting probably will also include a list by check number of your transactions. Here you'll see the check number, amount and when it posted, but not the payee.
Similar information will be listed on incoming cash to your account. For checks paid and deposits credited, make sure your records jibe with the bank's books.
5. Call your bank immediately if you find a problem. You'll be glad you closely followed your account's paper trail if you find yourself in a situation similar to one encountered by financial planner Zimmerman.
She got a notice from her bank saying that her youngest son's checking account was overdrawn by 56 cents. It wasn't much, but it didn't sound right. When Zimmerman called the bank, an officer there told her that the account wasn't in arrears and the bank wasn't sure how she had received the overdrawn notice.
Zimmerman's story had a happy ending (the bank acknowledged its mistake), in large part because she was paying attention and immediately acted on a discrepancy. If you report problems quickly, they're likely to be fixed quickly and not escalate. It's also easier to track things when they just happened vs. six months ago.
And by being prompt in your account reconciliation, you show the bank that you are trying to stay on top of your finances. That diligence could later pay off. For example, Zimmerman recommends that if you bounce a check, and it's the first time, ask for forgiveness including waiver of any fees.
"Lots of people don't realize that the rules can been waived and often a bank will do that for good will," Zimmerman says. Of course, don't expect to get off easy if you are a repeat offender.
6. Check daily balance summaries. First Eagle's Wegner says that most people don't need to analyze their daily balance summaries. However, there are exceptions: consumers with interest bearing accounts or those who must maintain a minimum average balance.
People who fall into these categories may want to keep closer tabs on daily balances to make sure their accounts are in compliance or to make sure they are paid the appropriate amount of interest.
7. Keep tabs on your account between statements. OK, maybe only truly obsessive people review their accounts daily via phone or the Internet.
But periodic checking on your account between printed statements does sometimes make sense. That's the case when you are expecting an out-of-the-ordinary transaction: Has that payment to the Internal Revenue Service been posted yet? Did that big freelance check clear?
Most of these tips don't take much time. And once they become a part of your financial routine, you'll find it's easy maintaining a healthy checking account.