A bank statement is a summary of all the transactions done by the account holder every time period. It is a detailed list of all debits and credits within a specified time period.
The time range typically consists of the schedule from the previous statement to the current one, which Is usually a month. As a rule by central banking authorities, a bank is obligated to deliver the bank statement of each account holder – either in hard copy or soft copy.
- Need for Bank Statements
- Various Formats and Important Information in a Bank Statement
- A Typical Example of a Bank Statement
- Various Places where a bank statement is required
- Advantages of your Bank Statements
It is an important financial document as it gives you a detailed synopsis of your spending.
Need for Bank Statements
We discuss below some of the reasons for the need for a bank statement-
- A bank statement is like a detailed summary of the various transaction details which you have carried out until the last recorded date
- They are a potent tool for taking care of any financial mismanagement
- It is a sure-shot way to keep a check on your expenses and spending
- Most importantly, it is a periodic track record on the basis of which you can plan your finances, future savings, and investments
- In other words, a detailed bank statement record is an important start to good and healthy financial management.
Research says that almost over 70 % of the consumers prefer keeping a tab on their finances through paper documents, and the remaining two-thirds prefer a combination of electronic and print.
Various Formats and Important Information in a Bank Statement
The various formats of a bank statement are –
The standard two formats of a bank statement are the electronic statement which a person can receive on the mail, and the next is the passbook statement.
The other formats include-
- The General Income statement
- The Financial Statement
- Cash Flow statement
- Monthly/ Quarterly income statement
The bank statement details all the following important contents-
- The account holder’s/company’s deposits’ for the specified period of time
- A list of the different withdrawals
- The different cheques are deposited during a specified time frame.
- And the different mandatory bank account deductions or charges occurred.
A Typical Example of a Bank Statement
A bank statement may show a non-interest-bearing cheque account with a balance of $1000, the total deposits of $4000, and the total withdrawals of $1500, along with the final ending balance.
Various Places where a bank statement is required
A bank statement is an important requirement for various important other legal and financial verifications which a person/company may require in his/its lifetime. And even though it is not required everywhere after a point of time, it is an important document nevertheless. We look at different situations where you need a bank statement and why keeping a tab is important.
Applying for a Bank/Business Loan
Applying for a mortgage or commercial loan? The first and the foremost document you need to submit is probably the bank statement, further which the rest of your work will proceed.
The lenders take detailed scrutiny of your credit score and your income and determine whether you are eligible for a loan. It also depends on what kind of rate of interest you will be getting.
To Avail the State Medical aid program
There are various state programs in the US that offer medical cover for the specially-abled elderly and the low-income family groups. However, since insurance is an income based program, there are limits on how much you can earn the credit points and how much you are actually eligible for the same. So to qualify for this kind of program, you need to submit your bank records.
To Avail the Free Application for Federal Student AID
The Free Application for the Federal Student Aid, also known as the FAFSA, determines where you are financially eligible for student aid at the US universities. However, before starting to file out the bank statements, gather other important information about the W-2S and the bank statements.
What is a W2
It is an Internal Revenue Service tax form used in the United States. It is a detailed record of the wages paid to the employees and the different taxes incurred from them.
Car Loan on the Cards?
Any kind of financial institution you are applying for a car loan will ask you for your bank statement. One of the reasons for asking for your bank statement is whether you have a steady income level and whether you have a healthy financial track record.
Credit bureaus provide a massive amount of information about your financial information to the various credit reporting agencies. However, in the process, there may be a possibility of a human or an unforeseen technical error, and the mistakes can include a varied lot of distorted information. At such times your bank statement is your knight in shining armor for fixing any kind of errors in your credit report.
Creating a Monthly/Annual Budget
One of the best things probably of a responsible financial manager is to keep track of your spending ideally in a month. Not only is it a healthy habit, but also a great way to secure your financial future. Referring to your bank statements regularly can help you plan your budget and take note of the unnecessary spending you would be making, if any. Bank statements will also reflect your credit card payments and other transfers you might have done.
Advantages of your Bank Statements
Well, the first and the foremost advantage of your bank statements is keeping a track record of all your financials.
But do you know there is more than only keeping a track record?
Identifying the Frauds and Errors
Your bank record shows records of all the transactions done by the account holder. Cybercrimes such as hacking, phishing, viruses, and Trojans are commonly rampant. The online bank transaction can clear a discrepancy of whether you have actually carried out the activity or not.
In most of these cases, federal law protects you in this. However, it is on your part as a responsible citizen that you act immediately. Report any suspicious or malicious activity to the concerned bank officials within 60 days of the problem occurred.
Planning Financial Goals
Learn the expenditure of your money. Your transaction history is direct proof of that. No bank transaction will give you a false credit record unless and until you have actually carried them out. You can keep a tab of all debits into investment plans. Similarly, you can see credits received from interest and dividends from various investments. You have a snapshot view of your financial reality, and you can plan ahead for your future financial goals.
If you are spending higher than the budget, then you will know the expense heads to cut.