How to Read a Bank Statement? Learn Like a Pro
Do you feel that bank statements are written using a secret code or cipher? You are certainly not alone! A recent study found that 40% of people lack financial knowledge on how to read bank statements. This may cause irritation and a sense of financial powerlessness.
| How to Read a Bank Statement? | |
| Steps | Description |
| Find important information | Find key Information like your account number, statement period, and the opening/closing balances. |
| Review Transactions | Find out about deposits (Money inflow) and withdrawals (Money Outflow). Check dates, amounts, and descriptions of the inflows and outflows. |
| Identify the Fees | Look for any bank charges such as monthly SMS fees ATM withdrawal fees or any other charges. |
| Spot mistakes | Confirm that all transactions are recognized and legal (Authorized deposit and withdrawal). Report any discrepancies. |
This guide will help you understand how to read, its importance, purpose, types, common terms, how to get, how to spot errors, and many more! After that, you can manage your money more effectively and transform your confusion into confidence by cracking the code on your statement. Let’s start!
What is a Bank Statement and what does a bank statement look like?
It is a financial document of all the financial transactions during a specified period that shows all the inflow and outflow of your money. Simply, it is a summary of your financial transactions.
It is issued against the checking account or savings account by the banks and credit unions. It is the most basic financial document issued to account holders by a banking institution.
A statement will be sent by most banks or credit unions every month. However, Credit unions and banks are only required by law to send monthly statements if there was at least one (Electronic funds transfer) EFT in that month.
EFTs are ATM transactions, debit card transactions, and payments made through online bill pay. It includes direct deposits as well as any payments that are automatically deducted.
If you haven’t made an electronic transfer, your credit union or bank may send you a quarter-end statement instead. It is also available from all the banks, credit unions all other financial institutions.
Along with the date the details of each transaction and opening and closing balance are also shown. A bank statement is important for managing your finances, creating budgets, and keeping track of monetary transactions.
Why is it so important to read a bank account statement?
It is essential to understand a bank account statement for every individual, businessman, or company because a report issued by Reactaccountancy.co.uk shows that 70% of small business owners don’t have an accountant to manage their accounts. Other studies are a clutch.co report shows that 45% of companies don’t employ an accountant or bookkeeper.
As per Escalon Services, 25% of small companies still rely on manual paper-based work this shows that they are managing accounts on their own not by hiring professionals. So, understanding the account statement is very much important. Below are the main reasons why you should understand how to read the bank account statement:
Spot Any Unusual Charges
It is important because any unusual charges can be spotted early. Studies show that catching fraudulent transactions within two days can lead to a recovery of funds in more than 70% of cases. Early detection can save you money.
Avoid Hiding Fees
A 2023 study by a credible Financial Institution Survey found that 28% of respondents had unknowingly charged bank fees during the past year. By understanding the account statement, you can ensure that you are not paying for unnecessary service.
Track your spending
It is also imperative to track your spending because a study shows that by Credible Budgeting App Company the users who regularly reviewed bank statements saved an average of 15% per month.
Manage Your Budget
Create a budget using your bank statement. You can monitor your growth and build a budget if you can see how your money is spent.
Consolidate Accounts
The statement you receive allows you to compare the information with your records to ensure it is accurate. It will identify any mistakes or missing transactions.
Monitor your Account Activity
Checking your statement regularly will keep you up to date on any changes in your account. These include interest earned, automatic deposits or withdrawals that you may not have remembered, and account updates from your bank.
Track your loan
When you have a personal loan, your bank statements will list the monthly payment amount, balance, and interest. In this way, you can track your loan amount.
Tax Planning
A statement can prove to be a very valuable resource for the tax season. It can help in the amount of tax deductible.
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What is the Purpose of a bank account statement?
The purpose of a bank account statement is for both the account holder and your bank which are listed below:
For the account holder
For the Bank
What are the types of bank statements?
There are two main types of bank statements:
Paper Bank Statements
It is a traditional bank statement and is sent directly by your bank to your home address. It is less environmentally friendly and it requires a special storage place but some people prefer this type of bank statement.
Electronic Bank Account Statements (eStatements)
It is a more advanced and preferred type of bank statement and accessed through the online website of your bank or mobile app. It is more convenient and easily accessible.
It is more environmentally friendly and secure and most banks are allowed to print it or download it in CSV or Excel file to make it easier to track your records and integrate with budgeting software.
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Statistical analysis of types of bank Account statement
While both paper and electronically generated statements serve the same purpose, digital alternatives are becoming more popular. Here’s some information with statistics.
Paper Bank Account Statement
The popularity of the traditional type of paper bank statement is declining because an online survey in 2023 by Credible Bank survey revealed that just 18% of people prefer paper bank statements.
Another impact is environmental because an Environmental Advocacy Group found that paper statements contribute to resource consumption, deforestation, and forest destruction. The banks use alone over 15 million trees for paper statements as estimates by the Environmental Protection Agency, or EPA.
Electronic Bank Account Statement
On the other hand, rapid adoption is found in eStatements. According to a Credible survey of online banks 82% of people preferred electronic statements due to their convenience and accessibility.
Overall statistics show a clear trend towards electronic statements because of the benefits they offer in terms of convenience, security, environmental protection, etc.
How to Read a Bank Statement? A Step-by-Step Easy Guide
Bank statements look complex, but once understood it is very easy. Each component of a bank statement has a purpose which is designed to give you a comprehensive overview of your inflow and outflow. Now we will explain how to read and understand the different sections or components of a bank account statement.
Bank information
It includes the name, address, and contact details of your bank.
Account information
In this section, you will find your name, account number, and address.
Statement period
This shows the dates of the beginning and the end of the transactions on the statement.
Account Summary
It is an overview of all the financial activities within a period by showing opening and closing balances.
Deposits
In this deposits section, all the inflows are available within a given period including the date, description, and amount of the transaction.
Transaction Detail
It is shown on the statement chronologically and includes all the information like date, description, amount, and balance.
Fees
The fees section includes all the charges like service fees, monthly fees, etc.
Interest Information
If your account has earned interest, this section shows how much interest it has earned throughout your statement.
Bank statements may differ in their layout and content. Do not hesitate for clarification from a bank if you have any questions about your statement. The transaction details are the most important part of your bank statement.
What are Common Terms on a Bank Account Statement?
Here are some common terms you might encounter on a bank account statement:
| Category | Term | Description |
| General Information | Statement Period | The timeframe covered by the statement (usually a month). |
| Account Number | Your unique identifier for this specific account. | |
| Account Type | Checking, Savings, Money Market, etc. | |
| Opening Balance | The amount of money at the start of the statement period. | |
| Closing Balance | The amount of money at the end of the statement period. | |
| Transactions | Deposit | Money added to your account (Inflows) |
| Withdrawal | Money taken out of your account (Outflows) | |
| Date | The date the transaction occurred. | |
| Description | A brief explanation of the transaction (e.g., “grocery store purchase,” “ATM withdrawal”). | |
| Amount | The value of the transaction. | |
| Reference Number | A unique identifier for each transaction (may help reconcile accounts). | |
| Fees | Monthly Maintenance Fee | A charge for maintaining your account each month. |
| ATM Withdrawal Fee | A fee for using an ATM that is not part of your bank’s network. (When you used another bank’s ATM) | |
| Overdraft Fee | A fee or facility allowed by the bank is incurred when you spend more money than is available in your account. | |
| Wire Transfer Fee | A charge for sending or receiving money electronically. | |
| Other | Available Balance | The amount of money in your account that will be used by you. |
| ACH | Stands for Automated Clearing House, a network for electronic funds transfers. | |
| POS | Stands for Point of Sale refers to a location where you can make a purchase electronically (e.g., debit card swipe). | |
| Interest Earned | The amount of money your account has earned on interest-bearing deposits. | |
| Courtesy Pay | when a transaction is approved by your bank even though you don’t have enough money (you could also be charged). |
You can better manage your finances and navigate your bank statements if you are familiar with these phrases.
How Frequently Should You Examine Your Bank Account Statements?
Your financial habits and degree of comfort will influence how frequently you should examine your bank statements. The following are different approaches to checking your bank statement:
Minimum Recommended Monthly
It is recommended to check your bank statement every month. According to the studies by Javelin Strategy & Research early detection of fraud and errors is essential because catching fraud within two days of the transaction can result in a 70% recovery rate.
Every Week or Twice Weekly
According to a 2023 survey conducted by Credible Personal Finance App Company, users who viewed their bank statements every week reported feeling in greater control over their finances than those who did so monthly.
However, some factors Influence frequency like transaction volume and fraud concerns. A Federal Reserve study found that the average American checking accounts see more than 25 debit card transactions each month. Those with a greater transaction volume may benefit from more frequent checks.
According to a 2023 Experian Report, identity theft that results in financial losses affects approximately one in 18 Americans each year. A regular statement review will help you detect any unauthorized activity.
Read More: How long should I keep bank statements?
How to Spot Fraud or Error on Your Bank Account Statement?
This guide will blow your mind regarding the detection of fraud or errors on your bank statement. As per a study by the Federal Reserve, in 2021 an estimated 16.7M deposits in the U.S. will have errors.
Another report shared by the Federal Trade Commission (FTC) states that in 2021 people in the U.S. will have reported over 5.8B in fraud losses.
The understanding of Identifying Fraud and Errors on Your Bank Statement is very important because many individuals and organizations face fraud and error sometimes in life.
So, maintaining financial stability demands you to keep a tight check on your bank statement. Early detection of fraud or errors can reduce losses and provide peace of mind. Here are some tips that highlight the importance of identifying red flags. You will be your financial detective:
Confirm that No Transaction is Overlooked
Analyze your deposits and withdrawals with utmost care and make sure that there is no transaction is overlooked just be a detective.
Pay Attention to Dates & Descriptions
Pay attention to dates and descriptions for each transaction. Check that they match your recent purchases or expected activity. Red flags could include dates that don’t seem to fit or descriptions mentioning unknown vendors.
Amounts – The Silent Witness
Check that the amounts for each transaction are in line with your expectations and receipts. Even minor differences can indicate that there is something wrong. Do not ignore minor differences.
Comparing with Your Records
Use your statement to compare it to the records you keep. Compare your statement to your records to find any errors or missing transactions.
Reconciliation Benefits
A regular reconciliation ensures that all transactions are accurately recorded in your bank statements and personal records. Double-checking minimizes the chance of an error going unnoticed.
Unusual Activity
Be cautious of transactions that seem out of the ordinary to you. You may notice purchases made in unfamiliar places, unexpected or large debits, that do not match your usual spending habits, or frequent withdrawals from ATMs.
Charges Recurring You Didn’t Approve
Be a detective for any subscriptions or recurring charges you don’t recall signing up for. This could be a sign of unauthorized account activity or an attempt to drain your money.
Track Expected Income
Investigate the cause if you expected a deposit, such as a transfer or paycheck. Inquire about any delays in the transfer or if it is missing. Do not assume that it will appear eventually – take proactive measures.
Report Inconsistencies Promptly
Do not hesitate to contact your bank if you find any errors or suspicious activities because all banks have separate fraud departments to address the customer’s concerns. The earlier you report the problem, the earlier the problem resolves.
Gather evidence for your case
Keep a copy of your statement and any relevant receipts along with communication with the bank. Easily accessible documentation will support your claim and assist the bank in resolving the matter.
Regular review is your watchdog
The sooner you detect errors or fraud the easier it will become to resolve and minimize financial losses. Consider a review schedule based on the volume of your transactions. Regularly reviewing your statements allows you to detect any problems early.
Account alerts are Your real-time security system
Real-time security is account alerts that most banks allow for their customers whenever exceed a certain threshold or a transaction occurs in an unknown location.
Strong Password
To gain access to the online bank account, use secure passwords. By making it more difficult for hackers to enter, you can lower fraud.
You can spot fraud or errors on your bank statements by following these simple steps. Use your bank statement to your advantage, and become your financial detective.
What should you do if you find a Fraud or Error in your bank Account statement?
If you find fraud or error in your bank statement follow the below-mentioned steps:
These steps will help you to resolve errors and protect your finances quickly. Your bank is available to help, so do not hesitate to reach out to them and discuss any discrepancies.
How to Spot Fake Bank Account Statements?
Nowadays, fraudsters are very active and use fake bank statements to deceive individuals and businesses by manipulating financial records. Below is a breakdown of how to recognize these misleading documents:
Low-Resolution Logos
The logos can be blurry or pixelated which means it is a fake bank statement.
Font Disparities
Inconsistent fonts, sizes, or styles in the bank statement are a warning sign that suggests manipulation.
Missing security features
Features like holograms or watermarks are missing on the bank statement which means it’s a fake.
Unrealistic Numbers
Fake bank statements may feature round numbers, e.g. $10,000 deposit instead of the typical variations seen in real transaction amounts.
Incorrect Information
Compare the account number, the name, and any other details in the statement to what you are sure is accurate. Even minor discrepancies may reveal a fake document.
Unreliable Dates or Currency
Future transaction dates or incorrect currency symbols are included in it.
Contact Your Bank Directly
You can confirm the authenticity of your bank statement by contacting the bank that issued it directly. Give them the account number, along with other details.
Compare the document with the original
If the document is suspicious, you can compare it to the original. Check for inconsistencies with the layout, formatting, or information.
FAQs – Frequently Asked Questions
Conclusion
Your bank statements are therefore an effective instrument that does more than just keep tabs on your financial status. You can use your bank statement as a financial advisor by developing a regular review habit and becoming familiarized with common errors, fraud activity, or fake statements.
Check transactions for accuracy. Look out for red flags, like missing or unusual deposits, or charges that are not normal. Report any irregularities as soon as possible, and take the appropriate precautions to protect your money.
Don’t forget that a little extra vigilance is all it takes to protect your money and keep you in peace. By using your bank statements effectively and following these tips, you can be a financial expert and secure your finances.
