Personal Finance Advice

Balancing a checkbook can be time-consuming. With so many people rushing just to get through the day’s activities, sitting down to balance a checkbook can fall by the wayside. Some people feel that as long as they have a roundabout idea of what their checking account balance it, there is no reason to sit down once a month and reconcile the balance with the statement issued by the financial institution.

The thought of this probably horrifies people who like to know down to the very penny how much is in their accounts, but if you are the type of person who allows the task of balancing your checkbook to slide, read on.

There are many good reasons for why you should take the time to balance your checkbook every month when your statement arrives. Don’t you want to know what is going on with your money? Many people find that when they pay close attention to where their money goes it helps them in their overall money management. After all, you need to know what your money is doing if you want to be able to tell it where to go. Having only a vague idea of how much money you have in your checking account is not a good idea if your goal is to gain control of your finances.

You are more likely to make mistakes with your checking account when you don’t effectively manage the checkbook. For example, you might think that you have enough money to cover a check you write, but since you haven’t glanced at your checkbook in some time you forget that you spent more than usual with your last grocery store excursion. The check you write bounces because of insufficient funds, you owe fees to both the financial institution and the merchant your wrote the check for, and all in all it’s not a good experience.

This is certainly not to say that only people who don’t balance their checkbook bounce checks, but you will probably be much more likely to wind up in this situation if you don’t know how much money you have in the bank.

You also want to examine your monthly statement compared to your checkbook in order to catch any potential errors or fraudulent activity. If you bank or credit union accidentally charges you $5 for a transaction that they said they would waive the fee for, but then you don’t check your statement to find out if the fee was actually waived, you might never notice that you were charged. If a thief gets access to your debit card number and starts making small purchases at first in an attempt to test the account, you may not notice the problem until the charges have stacked up to hundreds (or thousands) of dollars. Additionally, if you don’t notice the fraudulent charges until months down the road, you may have lost your right to dispute the charges.

When you take the time to reconcile your bank statement you’ll also start to notice where you can cut corners with your spending. You might notice that you eat out far more than you thought you did, or maybe you’ll realize that you make impulse purchases a lot more than you thought you did. Either way, balancing your checkbook can be a great way to double check your spending and to realize what spending needs to be pulled in.

If you can keep up with you checkbook and the monthly reconciliation with the statement, knowing your checking account balance down the penny isn’t really all that daunting a task. It’s your money; don’t you want to know how much you actually have?

You have a credit card account that is paid off and you don’t use anymore. You want to close the account because you’re afraid you might use it and wind up with a monthly payment, but on the other hand you are scared about what might happen to your credit score if you close it. You’ve heard that closing a revolving account can hurt your credit score, so what are you supposed to do?

A lot depends on the details of the account and if you plan on applying for a large loan (like an auto loan or mortgage) any time soon. Consider these factors when you are trying to decide whether or not to close a credit card account that you don’t need any more:

Your credit history: If you have a solid credit rating and nothing delinquent on your credit report, you may notice a small dip in your credit score, but it probably won’t be enough to pull your score down to levels that will make lenders pause before approving credit for you. An exception to this would be if the account you’re planning on closing is the largest available balance you have or if it is the oldest account on your report.

The history of the account. As mentioned above, if the account is the best account on your credit report -you’ve had it the longest and it has the highest available balance of all your accounts- then closing it may cause a big dip in your score. It is one thing to close a department store credit card with a $500 available limit that you never use, but it’s another thing entirely to pay off your only Visa with an available limit of $25,000 that you have had for several years.

Upcoming credit inquiries: Are you about to apply for a car loan or home loan? If you will soon have your credit reviewed by a lender, you may want to wait to close any accounts that are in good standing. If, on the other hand, you don’t have any reason in the near future to have your credit reviewed, there is no reason to keep the account open.

Your intentions: Do you know for a fact that leaving a credit account open and usable is just bad news for you? Maybe you are the kind of person who spends with reckless abandon and you just know that closing the account will save you future heartache because you’ll lose access to the credit. If this is the case, stop worrying so much about your credit score and worry more about your overall financial health. Close the account before you get yourself into trouble.

Most lenders give borrowers the option to pay monthly bills over the phone. Some lenders require you to speak to a customer service representative while others have an automated system that allows you to make a payment over the phone without having to go through an actual person. The amount you authorize is debited from your checking account, and this amount usually equals the amount of your payment plus any fee added by the lender.

It’s a convenient way to make a payment, especially if the payment is due that day or is already late. In fact, sometimes when a customer service representative calls about a late payment, the rep will offer to take the payment right then over the phone. While it can be an easy method to make a payment, you need to realize that sometimes lenders charge a high fee for the service. How high? Imagine making a $10 minimum payment, but paying $25 to do so over the phone. It hardly makes sense, unless you’re doing so to avoid an even costlier late fee.

What some customer service representatives don’t reveal to the customers they speak to over the phone is that usually the website for the lender will include a feature for a same-day payment that oftentimes cost much less than making the payment over the phone. Why does it cost less? If a lender can entice customers to utilize an automated system instead of dealing with a live customer service agent, it saves the lender money.

Make sure you are registered online with lenders so if you find yourself needing to make a payment on the same day you can use the online feature instead of making the payment over the phone and experiencing some hefty fees. You’ll want to register ahead of time because usually a lender’s website requires that checking accounts get verified before payments can be extracted from the account, and verification can take a few days. Verification might involve the lender making a small deposit of a few cents and then having you verify the amount deposited before the account is considered valid for payments. If you need to make a payment in a rush to avoid late fees, an unverified checking account is going to slow you down considerably.

Making a payment over the phone should not be a regular practice unless you’re dealing with lenders who do not charge for this type of transaction. Always ask how much the payment will cost you, and if you’re dealing with a live customer service representative you can ask about waiving the fee. You never know when you might find yourself dealing with someone who just so happens to enjoy waiving fees for polite customers.