When Watching Your Bank Balance Can Backfire

If you’re like most American these days you probably do most of your banking via online sites and mobile apps. In recent years banks have been able to offer a number of their services to customers at all hours of the day including the ability to access your balance, make transfers, and even deposit checks by photographing them. While this incredible convenience is hard to argue with, there is one unintended consequence of online banking you might not have thought of.

In a recent article for USA Today about saving and spending, financial planner Peter Dunn speculates that checking your bank accounts frequently can actually cause what he refers to as “balance spending.” As he explains, many of us will do some mental math to estimate how much we think should be in our account when we go to check the balance. The problem ensues when the guess proves conservative and we find a surplus of funds.

Dunn argues that when we see a higher number than expected it changes our spending behavior — after all, you have all these extra funds, right? Unfortunately in some cases the inflated balance may be the result of a pending transaction or a check that has yet to clear, which might actually bring your balance back down to earth. Even if that’s not the case increasing spending just because you can is rarely a good idea.

One way to avoid balance spending is to transfer “saved” money into a savings account. Many of us may try to save money making small changes to curb spending. However,  there is a big difference between “saving” and “not spending.” Until the funds earned from your cost-cutting are placed into the proper account, they can still fall victim to balance spending.

An example of how you can turn non-spending into savings is with gasoline. Right now gas prices are down, even hovering around $2 a gallon in many areas of the country. As a result commuters may feel they’ve “saved” a ton of cash filling up their tank when in actuality it’s only saved if it’s in a savings account.

Banking apps are great for a number of us that can’t get down to our local branch on a regular basis. They can also be great tools for monitoring your spending and ensuring you’re staying within your budget. However, to truly boost your budget and save money, considering transferring your bonus funds into a savings account as soon as their obtained.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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