How Long Should I Keep My Bank Statements?

Financial documents play an essential role in our daily lives. However, staying on top of all the mail, receipts, and financial records that flood our homes can be challenging. 

This is a quick guide on how long you should keep which financial document to keep your paper trail organized. Read on to learn more! 

What is a Bank Statement? 

Bank statements are an essential tool for tracking the transactions of your bank account over a specific period, usually monthly. 

These statements usually provide a detailed breakdown of your financial activities from your accounts, such as: 

• Checking or savings account
• Investment account
• Credit cards

Bank statements also typically include important details such as: 

• Contact information for the bank
• Account information
• Summary of your transactions, including deposits and withdrawals
• Your account’s starting and ending balance

By keeping these bank statements on file, you can demonstrate your business activity and use them to record your financial transactions. 

How Long To Keep Bank Statements

The length of time you should keep your bank and credit card statements depends on how you receive them.

If you receive paper statements in the mail because you do not have an online bank account, keeping the paper for 12 months is recommended. This time frame is typically sufficient to ensure that all transactions have cleared and any issues have been resolved. 

Once this period has elapsed, it is generally safe to shred paper statements to protect your personal information. 

On the other hand, if you have an online bank account and do not receive paper statements, you can usually access your electronic statements for a number of years when needed. 

The banks keep these documents accessible for more than a year and up to three years, depending on the bank. 

Keeping Other Financial Documents 

It is crucial to understand the roles financial documents have in our daily lives in order to know how long we should keep them. By knowing when we might need which document, we can become more organized when it comes to our paper trails.

Here’s a breakdown of the financial documents you should keep and for how long:

Less than a Year

• Receipts, unless they pertain to products under warranty, tax returns, or insurance claims
• Most monthly bills (after payments have been credited to your bank statement)
• Canceled checks (okay to shred once bank statement is verified, unless related to tax returns)

One Year

• Non-tax-related bank and credit card statements
• Investment statements
• Pay stubs
• Receipts for large purchases
• Paid medical bills (keep for a year unless you have an unresolved insurance dispute)

Seven Years or Longer

• Tax returns and supporting documents
• Receipts and payments related to tax returns
• Documents verifying information on tax returns (W-2 and 1099 forms, receipts for assets)
• Receipts related to assets (keep as long as you own the asset)

Remember, many companies offer electronic statements, which can reduce clutter. If you’re worried about keeping physical copies of documents, consider scanning them and disposing of the originals.

Top Reasons Why You Should Keep Your Bank Statement

Here are a few reasons why bank statements are important: 

Budgeting

Bank statements hold great importance for account holders in terms of financial planning and budgeting. They serve as a personal Profit and Loss (P&L) statement that allows individuals to keep track of their expenses and plan for future financial obligations. 

Bank statements provide a comprehensive record of expenditures in various categories, so they are often vital for budgeting purposes. 

For instance, by analyzing individual transactions, account holders can accurately determine their monthly food expenditures. 

Identifying Fraud

Bank statements or e-statements are often available at the end of each month. The account holders are typically given 30-60 days to examine the charges and reconcile their cash balance. 

This time frame provides a valuable opportunity to detect any fraudulent activity in the account. The bank statement contains detailed information regarding charges, dates, and payees, which can be useful for the account holder.

By analyzing the bank statement, account holders can quickly identify any charges they did not initiate and promptly contact the bank to report any fraudulent transactions. 

Verifying Creditworthiness

Bank statements are also crucial in assessing creditworthiness. 

Most banks and financial institutions require bank statements for the previous 2-5 years before granting loans to individuals.

Institutions use bank statements and other credit documents to evaluate the creditworthiness of the borrower. This applies to various types of loans, including: 

• Residential mortgages
• Student loans
• Small business loans

Therefore, bank statements are a valuable tool for account holders in financial planning, budgeting, reconciliation of cash balances, and credit verification.

Frequently Asked Questions

How Does A Bank Statement Differ From A Transaction History?

A transaction history is a comprehensive record of all the transactions for a particular bank account over a selected period. On the other hand, a bank statement typically provides a summary of account activity for a single month and may not include recent or pending transactions.

Why Are Bank Statements Important?

Bank statements are a useful means for account holders to monitor the accountability of their financial institution. They provide an effective tool for account holders to keep track of their finances, identify discrepancies and errors, and gain insight into their spending patterns.

Can Anyone Check My Bank Statement?

No. Financial institutions maintain strict confidentiality of their customers’ bank statements. They are not allowed to disclose these statements to unauthorized individuals or third parties. 

Do I need to check my bank statement often?

While some individuals may prefer to review their bank statements monthly, it is advisable to check them at least once a week to maintain a good understanding of their finances and spending patterns.

Bottom Line: Organize Your Bank Statements

Bank and credit card statements offer a concise and comprehensive overview of the status of your accounts. Frequent review of these statements is necessary to identify any instances of fraud or other anomalies, such as unusual charges. 

It is also advisable to retain these statements for the required period to support tax preparation or fraud/dispute resolution. Managing your financial life involves dealing with various documents such as bank statements, insurance documents, and tax-related materials.