A bank statement is a document prepared by your financial institution that summarizes your financial transactions. It includes a list of all activities occurring in your account over a set period.
Correctly reading your bank statement is crucial to better understand where your money goes and in what areas you can potentially save. In general, reviewing your bank statements allows you to get better insights into your financial habits.
By understanding your bank statements, you take control of your finances, bringing you closer to reaching your financial goals.
What Is a Bank Statement
Bank statements are official financial documents summarizing your account activities over a specific period – typically a month. With bank statements, you can see the transaction records, including incoming and outgoing cash flows.
As a result, you know what’s happening to your funds during this duration. These documents are crucial for account owners because they can use bank statements to track their money, review money habits, and identify fraudulent transactions or possible payment errors.
Every time you complete a transaction, the bank keeps a record of it. Then, they compile these records from a specific period to make a bank statement. This document typically includes incoming payments, salary, all deposits or money transfers, and cash withdrawals.
It also gives the starting and ending balances that give you a clear idea of how much you’ve got at the end of the month compared to the start.
How Long Is a Statement Cycle?
Most banks send a bank statement once a month. However, if you don’t have any transactions for that period, some banks may opt to send them quarterly.
As mentioned, a one-month statement period dates don’t necessarily match the first and last days of the month. For example, a bank can track your account from the twelfth day of each month to the eleventh day of the following month.
Typically, the length of the account’s cycle is approximately 30 days. However, that time may change due to the variation of statement cycle dates.
What Does a Bank Statement Look Like?
Usually, you find your full name and some sensitive information at the top of your bank statement, including the account number and branch number. It also includes a table summarizing the statement period dates, opening, and closing balances, deposits, and withdrawals. For the closing balance, it is calculated as:
Closing Balance = Opening Balance + Deposits – Withdrawals
After the summary table, your bank account statement shows all the transactions you engaged in for that period, including the corresponding dates, payees, and transaction amounts. Usually, you can find these transactions presented in chronological order. By looking at these figures, you know where, when and how much you spend money.
It also allows you to estimate your monthly savings and expenses if you find time to analyze your bank statements from the previous months. They can help you with your budgeting and financial planning.
Electronic Bank Statements vs. Paper Bank Statements
Your bank gives you the freedom to access your bank statement, either in hard copy or electronic copy via email or online system. The electronic report (e-statement) is the exact copy of your bank statement, only sent electronically.
Going paperless gives you many benefits, such as cutting down on clutter and allowing you to access your account whenever and wherever there is an internet connection.
According to a 2017 survey by Two Sides North America, almost 70 percent of consumers prefer to track their expenses with paper statements. Around 66 percent prefer a combination of paper and e-statements.
Consider what format is best for you. Perhaps you would enjoy a combination of electronic and paper bank statements so you can quickly check on the go but still have a paper statement to file.
What Are Some Examples of Fees that Can Be Seen on a Bank Statement?
Whether checking an electronic or paper bank statement, you can find the following fees on a bank statement within the given timeframe:
- Wire transfer fee
- Pre-established monthly maintenance fees
- Insufficient funds fees
- Out-of-network ATM fee
- Overdraft fees
- Deductions like service charge, safe deposit box rent, not sufficient fund charge, printing cost of checks, and transfer fees
- Excessive transactions fee
How to Read a Bank Statement?
If you know how to read bank statements, you realize they aren’t that complicated even though they have a vast deal of information which may confuse you at times. While the information may vary depending on the bank, most of these bank statements have the following information:
- Bank information. Bank statements should include your bank’s contact information, including their mailing address and contact numbers.
- Personal information. Bank statements also include your personal information, such as full name, contact details, and mailing address.
- Statement period dates. Your bank includes the statement period dates in your account statement. Typically, these dates are specified by the issuing bank. The start and end dates don’t necessarily match up with the calendar month. For example, the start date could be the 5th of the month and ends on the 4th of the following month.
- Starting balance and ending balance. Your bank statement includes these balances to see where you began and identify any progress or regression you made for that period.
- Transactions and fees. Additionally, the bank declares all kinds of transactions, including deposits, checks, withdrawals, ATM withdrawals, transfers, and other pending transactions. In case you’re charged for a banking service fee, your bank statement also shows it.
- Interest earned. If your account is interest-bearing, your bank statement will reflect any interest you’ve gained over the timeframe.
What to Look out for When Reviewing Bank Account Statements?
A diligent and organized review with statement reconciliation is necessary to detect any fraudulent activities, verify deposits posted to your account, and identify duplicate payments.
Here are some of the things you need to consider when reviewing your account statement:
- Your bank statement must come properly sealed. Immediately notify your bank if it has been tampered with or opened upon receipt.
- Review your starting, ending, and average daily balances to check if something’s not making sense on how you use your account.
- Watch your statement closely. Unless you initiate these activities, even small amounts can signify that someone is phishing for an account they want to hack in the future.
- Check all your debit and ATM card activities to verify the authenticity of the transactions and detect possible duplicate charges. Identify if there are unauthorized e-transfers in and out of your account by your or other owners or signers.
- Review your bank statement carefully for possible withdrawals that you’ve canceled but not reflected.
Take a few minutes every month to review your bank statements. In the long run, it can save you time, money, and effort.
How Often Should You Check Your Bank Statement?
While some account owners always check their bank statements throughout the day, some never look at them at all. If you’re an account holder, it’s best to review your purchases at least once or twice a week. Don’t wait for more than a month before you check your account.
Thankfully, there is mobile banking to help you check your account wherever you are as long as you have access to the internet. Statistics show that 86.5 percent of Americans used their mobile devices to check bank balances in 2020, which helps them quickly prevent unauthorized transactions and overdrafts.
Why Should You Check Bank Statements Frequently?
Here are some of the reasons why checking your bank statement frequently is worth your while:
Avoiding an Overdrawn Account
There’s nothing worse than a cashier telling you that your card is declined. It’s most likely that you didn’t realize your balance was running low. Thus, it’s vital to ensure that your banking habits align with your spending habits.
One way to do this is to constantly monitor your account to identify where you’re spending the most. Additionally, constant monitoring helps you know how much money is left in your account, preventing overspending and overdrawing.
Early Identification of Fraudulent Activities
According to the study conducted by the Association of Certified Fraud Examiners, the least common fraud type is bank statement fraud which accounted for only 10 percent of detected cases.
However, it’s one of the most expensive types of crime, accounting for a $954,000 median loss when it happens. Nearly 33 percent of all fraud cases have resulted from a lack of internal controls, and around 50 percent of these fraud cases occurred in the U.S. and Canada.
When it comes to your account, it’s best to be proactive in protecting your personal information and accounts for suspicious and unauthorized purchasing behavior.
If you suspect any unfamiliar transaction, call your bank as soon as possible to help you recover your lost funds. Additionally, you can prevent this from happening by reviewing your bank statements regularly.
Provides a Snapshot of Your Income vs. Spending
If your spending habits don’t align with your earning potential, seeing your account’s ending balance is a sobering experience. If the ending balance is less than $20, take it as a wake-up call to set and stick to a working budget.
Take the time to review your account regularly to get an insight into your spending habits. If you’re paying for a loan, for example, seeing how much you spend on it can urge you to look for a more affordable lender so you can save.
What Else Can You Do With Bank Statements?
A bank statement comes in handy for several reasons. It becomes an easy-to-use tool to help you monitor your expenses and catch errors. There are many things you do with your bank statement, including the following.
Creating Budget and Financial Planning
Bank statements are like your personal profit and loss (P&L) statements. They help you manage your finances and make plans for future expenditures. These statements are also beneficial for budgeting because they allow you to decipher how much you’re spending on various things.
For example, you can calculate your monthly expenses on food by looking at your bank statement and adding up all the individual transactions. With this, you have a clearer picture of your food allotment, which also helps you decide whether you’re already over the limit for that month.
Reconciliation and Error Identification
At every end of the period, the bank prepares your bank statement. Typically, you have 30-60 working days to read and analyze your account and reconcile the cash balance once you receive it.
Since this document includes all the transactions and charges, including the corresponding payees and dates, you can identify potentially fraudulent activities.
For example, if you see an unauthorized debit or charge for a transaction in the bank statement, you can contact your bank and request them to look at this fraudulent transaction. If this happens, cancel the card to prevent more transactions from coming through.
According to Statista, 70 percent of the surveyed U.S. banking customers consider opening a checking or savings account from a bank with branches nearby for easy customer support. With this, you can go directly to any of the branches to help address any of your concerns.
How to Reconcile Your Bank Statement
Reconciliation can serve many purposes, including verifying all bank transactions, ensuring no errors, missed payments, or double payments, and tracking uncashed checks from the previous period.
Additionally, it gives you a better insight into your spending habits, leading to better financial management. If you’re not sure how to reconcile your bank statement, here are the following steps:
- Having your own records is a good practice in financial management. This way, you can check your bank account statement against them. You can save your records using a notebook, an app, or software.
- Next, check your balance. Ensure that the reflected starting balance on the statement matches your own record. If not, identify and correct the possible issue.
- Then, check and review the listed deposits and see if they match up to your records.
- Lastly, check your withdrawals. Do the checking in the same manner with your deposits.
- If you notice something doesn’t add up, try to identify or fix the issue by correcting the errors or adjusting your records in case you missed something. The primary goal is to match the ending balance on your documents with the monthly statement.
How to Correct an Error on Your Bank Statement?
While it’s not unusual, finding an error on the bank account statement can be frustrating on your part, especially if you do your best to reconcile your account. If you come across a mistake, you need to work with your bank immediately to fix the matter.
Here are the steps to correct an error on your statement:
- Verify the error. If you identify a mistake, take the time to verify it. It’s also important to set aside any piece of evidence for that possible error to show your bank.
- Contact the bank. Reach out to your bank and inform them about the potential mistake. You can reach out to them through their customer service department, email, or going directly to their branch. If contacting via email, attach the proof of the error. If calling by phone, inform them you have the evidence of the error and ask them how to send it.
- If there’s a third party involved, contact them. Please find time to inform the third party about the error if it might also affect their records. Getting them involved might help you resolve the issue faster than doing it on your own.
- Adjust your own records. After fixing the issue, adjust your own records. It’s a good practice to keep these records in case of any problem later on.
A bank statement also helps in analyzing the account holder’s creditworthiness. For example, most financial institutions require you to submit your bank statements for the last 2-5 years if you apply for a loan.
They do this for verification purposes before they approve your application. This applies to almost all loan types, including student loans, small business loans, and residential mortgages.
Why Is It Important to Review Your Checking Account Statement?
Reviewing your checking account statement is critical and can give you many benefits. Under the law, once your bank issues the account statement, you must exercise reasonable promptness to review the document for possible mistakes.
If you see, for example, a forgery in your statement, you need to notify the bank immediately. Otherwise, it’s possible you can’t bring a claim against the bank if you fail to inform them within 30 days upon receipt of the statement.
However, you can still assert a claim against your bank if you have proof that you didn’t make that payment and if you can prove that your bank didn’t exercise care in making the payment, contributing to the loss.
So, What Is a Bank Statement?
A bank issues an account statement to show you the detailed activities inside your account on a monthly or quarterly basis on a set date. It allows you to see all the processed transactions, from deposits, withdrawals, transfers, and many more.
Learning how to read your bank statement is necessary to help you gauge your spending, track your savings, identify frauds, and make better decisions so you can achieve financial well-being. Remember that your bank statement includes highly sensitive information. If it falls into the wrong hands, it may be used for any fraudulent activity. Notify your bank immediately if you suspect any unusual activities.