A bank statement is a document that shows account activity and account balances over the last month or quarter. It is also known as an account statement. They also contain bank account information including account numbers and names.
What does a bank statement show?
Statements show you important details about your account on a monthly or quarterly basis. The two main details that it shows you are the starting and ending balances as well as transactions.
The types of transactions that it shows you are as follows:
• Deposits – see all additions to your account including wages, salary, checks or cash that you deposited and bank transfers. Knowing this will show you how much you can spend after taxes and deductions is important.
• Withdrawals – you need to know every transfer out of your account to show how you are spending as well as know how much cash was withdrawn from an ATM.
• Fees – these can eat away at your savings and add up to significant annual costs. If you are being charged by your bank such as through monthly fees, overdraft fees or any other charges ask your bank for fee waivers or open a free current account.
• Interest earnings – ‘If you earn interest from savings accounts or certificates of deposit (CDs), you’ll see those earnings on your statement.’ Source
• Other transactions – As your account shows details of everything that happened, less frequent transactions will also show up that you would otherwise have forgotten about. These could be outstanding checks or returned deposits.
Why are bank statements important?
1. Applying for loans
Apart from conducting a credit check, credit unions also check your bank statements before offering a loan to ensure that you will be able to repay the loan. They do this through open banking.
Some of the aspects that we look at in your bank statement include:
• Income and expenditure – we check that you have a source of income coming through such as salary/wages or benefits. We also check your expenditure such as bills and credit card repayments
• Returned direct debits
• Negative bank balances
• Paying off lots of loans
• Gambling activity
Other reasons why bank statements are important:
2. They help you better understand how your money is moving and ensure you make better financial decisions in the future.
3. Identify fraud and errors – as your statement shows all transactions, you will be able to tell if there were any abnormal transactions that could be a result of theft or bank error. The sooner you notify your bank, the more protection you have. If you take over 60 days to report the problem, you may be responsible for the losses in your account.
4. Applying for mortgages or other situations such as student loans or larger loans, where you need to document your assets and income.
5. Balancing your account – if you notice that there is something wrong with either the credit or debit side of your account, you can refer to your bank statement and track the transactions.
6. Knowing how much you have – unless you check your account every day or signed up to account alerts, you might not know how much money is in your current and savings accounts. Therefore, monthly statements can provide you with an opportunity to check in and see where you stand.
How can you check your bank statements?
You can either check your bank statements on paper or online.
By going paperless, you may be able to avoid monthly fees. You will also be able to maintain privacy, easier storage, and retrieval whereby you can download and save your documents for easy access and sustainability.
Paper statements can be beneficial if you need a physical document in your hand to do tedious (yet necessary) monthly tasks. They are also difficult to ignore so if you have issues logging into your online account or you usually just delete email notifications, then physical bank statements are better for you. You can always go paperless later.
A special thanks to Tracy nee Nash, Operations Manager at Credit Union Solutions for sharing her information about the factors that they consider when checking bank statements.