How to Use a Bank Statement (and Why You Should Be Reading Yours)

Woman reviewing paper statements and online records
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A bank statement is a document showing details about account activity and account balances over the last month or quarter. With that information, you can balance your account, review spending, and spot errors and fraud before they become serious problems.

While bank statements may seem boring, they’re essential tools for reaching your financial goals. Review these reports regularly so that you make the most of your money and protect your savings.

What Bank Statements Show

Statements show the vital details about your account over the last month.

Starting and ending balances: See how much you had in your account at the beginning and end of each period. If your goal is to grow your account, this is a quick test to show your progress. If you have more than you need for your monthly budget, you can also see how much is available to move into longer-term savings and investments.

Transactions: Your statement shows every transaction in your account, helping you make sense of where the money comes from and where it goes.

  • Deposits: See all additions to your account, including direct deposit of your wages, any checks or cash you deposited, and other credits to your account. This information can help you understand how much of your monthly income is really available for spending after taxes and deductions.
  • Withdrawals: You need to know about every transfer out of your account, so review withdrawals and spending carefully. Types of withdrawals include money you spend with your debit card, automatic bill payments and ACH withdrawals, and cash withdrawals at ATMs.
  • Fees: Fees can eat away at your savings and add up to significant annual costs. Find out if you’re paying monthly fees, overdraft fees, or any other charges. If you are, ask your bank about fee waivers or open a free checking account.
  • Interest earnings: If you earn interest from savings accounts or certificates of deposit (CDs), you’ll see those earnings on your statement.
  • Other transactions: Your statement details everything in your account. Less-frequent transactions will also show up, informing you about important events in your account. For example, you might see maturing CDs, returned deposits, and outstanding checks that went stale and were credited to your account.

How to Use Your Statements

Your bank will create statements monthly or quarterly and send them to your mailing address unless you are opted-in to receive paperless bank statements.

Balance your account: It’s wise to balance or reconcile your bank accounts every month. To do so, review every transaction on your bank statement and compare it to your own records of what’s happening in your account. This helps ensure that you and your bank agree about how much you have in your account, how much was added, and how much was removed. Occasionally, you’ll find discrepancies—which is fine if they’re just timing issues that clear themselves up. Sometimes you’ll see serious problems.

Identify fraud and errors: Your statement shows you a record of all transactions in your account. If you see anything unexpected, research the transaction to see if it’s a result of theft or a bank error. In many cases, federal law protects you from losses. The sooner you notify your bank, the more protection you have—but you might be responsible for losses in your account if you wait more than 60 days to report the problem.

Understand spending and income: Bank statements don’t lie. If you want to know where your money goes, your transaction history tells a detailed story that can help you track your spending. If you need to make changes to your budget, your statement can show you what the impact will be—and next month it will hold you accountable.

Know how much you have: Unless you check your account every day or sign up for account alerts, you might not know how much money you have in checking and savings. Monthly statements provide a regular opportunity for you to check-in and see where you stand. You’re less likely to miss payments and pay penalty fees due to insufficient funds when you keep tabs on your account.

Document your finances: Statements are useful when applying for loans, and in other situations where you need to document your assets and income. As official, periodic, documents, lenders often demand two or more bank statements when you apply for home loans and other large loans. You may need a recent statement for student loan verification.

Electronic vs. Paper Statements

Traditionally, bank statements came via mail, making them difficult to ignore. Now, banks and credit unions promote electronic statements, and you may be able to avoid monthly maintenance fees by agreeing to go paperless.

Paperless statements are a good option for several reasons.

  1. Privacy: Your personal information does not go through the mail every month, giving thieves an opportunity to steal letters and use them for identity theft. Plus, there’s no need to destroy or secure those documents after you read them.
  2. Storage and retrieval: When you choose electronic statements, your bank typically stores several years’ worth of historical statements online for you. You can also download and save those documents yourself for easy access. Electronic statements are at your fingertips 24/7, and they don’t take up space.
  3. Sustainability: Going paperless obviously saves paper, but it also reduces the amount of fuel and other resources needed to produce statements and deliver them to your home or office.

Don’t rule out paper statements if electronic statements aren’t right for you. Sometimes it takes a physical document in your hands to make you perform mundane monthly tasks. If you’ll just delete email notifications about new statements and ignore your accounts, you’re better off sticking with traditional bank statements. You can always go paperless later.