Bank Statement: What is It and How Does It Work?
Manually keeping track of your deposits and withdrawals can be a hassle, so having access to your bank statements is a must. Account holders who want to be good stewards of their money should review their statements frequently.
However, what exactly is the purpose of a bank statement, and how does it work? Discover the answer by reading this article.
What is a Bank statement?
A bank statement is a financial record of all activities in your bank account, usually covering one month. Your bank usually provides you with this document monthly. You will see the transactions in chronological order. Important details:
- dates of transactions
- your withdrawals
- automatic payments
- cash and check deposits
- direct deposits
- service fees and penalties
- fund transfers
- names of payees
- interest earned
- account number
They also include the following:
- starting balance for that period
- ending balance for that period
- your average daily balance
- your branch’s details
As you can see, the details contained in a bank statement are all essential and those which we would otherwise not remember if we only recorded things manually.
3 Main Purpose of Bank Statements
Taking a bird’s eye view of your finances will help you manage your money and make smarter choices. You benefit greatly from having a bank statement at your disposal. For instance, it can facilitate interactions with tax authorities.
The three primary uses for bank statements are as follows:
When you process your income taxes, you must verify your income and costs, such as business expenses and charitable contributions. As such, bank statements help verify them.
Prevent Financial Frauds
Since a bank statement details all transactions, it can help identify potential fraud. See if your account records have any discrepancies.
Banks use intelligent document processing, or IDP, which automates and organizes captured data from multiple documents and data sources. Users can rely on this because it will help them identify any mismatches or discrepancies in amounts and compare them with their records.
Minimize Accounting Errors
Using automation to record and manage vast amounts of banking data made manual entry obsolete. The latter is prone to human error, so we can extract information from bank statements easily and quickly with the advent of technology. This way, customers don’t have to worry about the following:
- missing values
- mistyped amounts
- accounting errors
- other mistakes
As such, reading and recording information became much easier for financial institutions.
Frequently Asked Questions
Can I choose between a paper and an electronic bank statement?
Yes, most banks let you choose between the two. They usually send a physical copy via mail and post the electronic one to your account.
Do I need to pay a fee when requesting my bank statement?
If you mail your request, your bank may charge you. However, you can access your statement online for free through your bank’s website. Once you see it, you can save or print it.
Can anyone see my bank statement?
Your bank will never share your statements with unauthorized individuals or third parties. No one can view them unless they know your account details, net banking details, credit or debit card number, and PIN.
How long do banks keep my bank statement?
They are legally mandated to keep your bank statements for at least 5 years, even if your account has already closed.
The Bottom Line
A bank statement is undeniably a powerful document that can help you see and manage where your money goes. It’s an excellent partner to help keep your account safe and secure, so you must check it as often as possible.
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