Tracking your income and expenses can help you make prudent financial decisions and feel more in control of your money. Many people turn to bank statements when planning budgets and looking for opportunities to save money. Bank statements contain records of your previous transactions and can help you identify spending patterns. This guide will reveal how to interpret these statements and ways to use them to strengthen your finances.
The Importance of Bank Statements
Bank statements give consumers a snapshot of their financial activity. That information can help people stay on top of their finances and monitor suspicious activity. Here are some of the reasons these statements hold significant value.
Tracking Financial Transactions
Banks record your deposits and withdrawals. You can also see where your money gets spent and check and other transactions. You can find suspicious transactions through a bank statement, and it is also possible to discover opportunities to lower your expenses.
Monitoring Account Balances
Bank statements showcase an account’s opening and closing balances for the cycle. Consumers can review this information to determine whether there were any unauthorized charges. It can also give consumers a better scope of their finances. While many people have an idea of whether their finances are good or bad, monitoring your account balances gives you a number. Having more clarity can lead to goals that improve your finances and put you in a better position.
Proof of Financial Transactions
Bank statements act as viable proof of transactions. You can use this statement when reaching out to a vendor to verify you made a purchase when asking for a refund. You can also check to see whether a purchase went through if you are not sure.
Budgeting and Financial Planning
Bank statements reveal where your money goes. You may have an idea of how much you spend on various categories, but a bank statement offers concrete numbers. You can use the information to construct a budget and create an ambitious but reasonable financial plan.
How to Interpret and Understand a Bank Statement
A bank statement has several components, but it’s simply a list of your transactions. Once you get the basics, it becomes easy to review and understand a bank statement.
Account Summary and Basic Information
The account summary section provides basic information about your account. In this section, you will find some of your personal details, the account number and the statement period. You can also find the beginning and ending balances along with interest earned and any applicable fees.
Transaction Details and Descriptions
Every transaction gets listed on your bank account statement. You can view multiple transaction types, such as deposits, withdrawals, purchases and fees. Each account statement item includes the transaction date, amount and a brief description. The description helps you identify what you purchased or where you moved your funds.
Debit and Credit Entries
Every transaction is either a debit or credit. Debits involve money leaving your account for purchases, money transfers and other reasons. Credits indicate money going into your account, such as when you deposit a paycheck. Having more credits typically results in a higher bank account balance, but a large debit can exceed many small credits.
Reconciling with Personal Records
Comparing your bank statement against your personal records can help with budgeting and identifying discrepancies. Keeping digital transaction records that websites give you via email can make it easier to double-check your bank statement. You don’t have to follow this step every month, but it’s good to know you have this option if you feel suspicious about a charge or your total expenses.
Interest, Fees and Other Charges
Your bank statement will include interest, fees and other charges. Tracking the interest you earn can give you extra motivation to save money, knowing that every dollar you put into a high-yield savings account increases your monthly payment.
You will also find fees in your bank account. Some of the fees are avoidable, and knowing how to avoid them can help you save money. For instance, you may have an account maintenance fee. It’s possible to find a bank that does not have this fee and move your funds to that account instead. If you incur overdraft fees often, you may want to pick up a short-term side hustle to give yourself a financial buffer. Some banks are more generous with overdraft protection and may be worth a closer look.
Checking each item can help you ensure accuracy. You should speak with your bank’s customer support if you spot any errors. While the chance of an error is low, it is possible.
How to Obtain Your Bank Statement
Looking at your bank statement at the end of each cycle can give you a better understanding of your finances. You can obtain your bank statement through the following options.
Online Banking Portal
Most financial institutions have online banking portals that make it easy to find bank account statements. You can enter your username and password to access all of your bank account statements. You can decide which statement to view and don’t have to keep any paperwork.
Mobile Banking App
A mobile banking app is a more convenient version of an online banking portal. You still need an internet connection and login credentials to view your bank statement. But you can tap on a mobile banking app on your phone instead of opening your web browser and typing the URL. It’s a little quicker to use a mobile banking app than use your mobile browser to visit the online banking portal.
In-Person Branch Visit
Some people prefer face-to-face interactions over a digital experience. Customers who do business with brick-and-mortar banks can visit branches and request their bank statements. You will have to verify your identity before obtaining your bank statement.
Statement Mailing or Email Request
Many banks give their customers the option to obtain their monthly bank statements via email or physical delivery. If you select this option, the bank will automatically provide your statement. Some banks have a simple form or toggle that lets you set up this feature. Other banks may require that you give them a call or contact email support to receive your statement in the mail or your digital inbox.
How Long Do Banks Preserve Bank Statements?
Federal laws require banks to store your bank statements for five years. Some banks keep their customers’ bank statements for up to seven years. Printing out copies of bank statements and storing them allows you to go back to older documents after the bank stops preserving them.
Get More Control Over Your Finances
A bank statement helps consumers assess their transactions for the cycle. This information can reveal opportunities to trim expenses and potentially discover errors. A bank statement is a valuable financial document that can help you gain more control over your finances.
Frequently Asked Questions
How often do I receive a bank statement?
You will receive a bank statement every month.
What information does a bank statement contain?
Your bank statement contains personal information, your beginning and ending balance and a detailed list of all of your transactions for the cycle.
What is the purpose of a bank statement?
A bank statement helps consumers monitor their finances for any discrepancies. Consumers can also discover opportunities to lower their expenses and create effective budgets.
About Marc Guberti
Marc Guberti is a personal finance writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.