While bank statements may seem boring, they’re essential tools for managing your finances and avoiding problems. Review these reports regularly.
What Bank Statements Show
Statements show the vital details about your account over the last month or quarter.
Starting and Ending Balances
See how much you had in your account at the beginning and end of each period. If your goal is to grow your account, this is a quick test to check your progress. If you have more than you need for your monthly budget, you can also see how much is available to move into longer-term savings and investments.
Transactions
Deposits: See all additions to your account, including direct deposit of your wages, any checks or cash you deposited, on-us items, and other credits to your account. This information can help you understand how much you bring in—and how much of your monthly income is available for spending after taxes and deductions. Withdrawals: You need to know about every transfer out of your account, so review withdrawals and spending carefully. Examples of withdrawals include money you spend with your debit card, automatic bill payments and ACH withdrawals, and cash withdrawals at ATMs. Fees: Fees can eat away at your savings and add up to significant annual costs. Find out if you’re paying monthly fees, overdraft fees, or any other charges. If you are, ask your bank how to qualify for fee waivers, or open a free checking account. Interest earnings: If you earn interest from savings accounts or certificates of deposit (CDs), you’ll see those earnings on your statement. Other transactions: Your statement details everything that happened in your account. Less-frequent transactions will also show up, informing you about important events you might otherwise forget about. For example, you might see maturing CDs, returned deposits, and outstanding checks that went stale and were credited to your account.
How to Use Your Statements
Your bank will create statements monthly or quarterly and send them to your mailing address unless you opt-in to receive paperless statements.
Balance Your Account
It’s wise to balance or reconcile your bank accounts every month. To do so, review every transaction on your bank statement and compare it to your own records of what happened in your account. This helps ensure that you and your bank agree on how much you have in your account, how much was added, and how much was removed. Occasionally, you’ll find discrepancies—which is fine if they’re just timing issues that clear themselves up. Sometimes you’ll discover serious problems.
Identify Fraud and Errors
Your statement shows you a record of all transactions in your account. If you see anything unexpected, research the transaction to see if it’s a result of theft or a bank error. In many cases, federal law protects you from losses. The sooner you notify your bank, the more protection you have—but you might be responsible for losses in your account if you wait more than 60 days to report the problem.
Understand Spending and Income
Bank statements display the facts (with no judgment). If you want to know where your money goes, your transaction history tells a detailed story that can help you track your spending. If you need to make changes to your budget, your statement can show you what the impact will be—and next month it will hold you accountable.
Know How Much You Have
Unless you check your account every day or sign up for account alerts, you might not know how much money you have in your checking and savings accounts. Monthly statements provide a regular opportunity for you to check in and see where you stand.
Document Your Finances
Statements are useful when applying for loans, and in other situations where you need to document your assets and income. As official, periodic, documents, lenders often demand two or more bank statements when you apply for home loans and other large loans. You may need a recent statement for student loan verification.
Electronic vs. Paper Statements
Traditionally, bank statements came via mail, making them difficult to ignore. Now, banks and credit unions promote electronic statements, and you may be able to avoid monthly fees by agreeing to go paperless. Paperless statements are a good option for several reasons. Don’t rule out paper statements if electronic statements aren’t right for you. Sometimes it takes a physical document in your hands to make you perform mundane monthly tasks.
