What are Bank Statements & why are they important?
A Bank Statement is a record of the balance in a bank account, along with a list of amounts withdrawn & paid into it, provided by the bank to help the account holder(s) keep track of his/her finances. Here are a few reasons why bank statements are important:
- Keeping Records:
A bank statement is like a personal P&L statement that provides a detailed analysis of the account holder’s expenditures that allows them to plan for future purchases & payments.
*Important* Every account holder needs to review their bank statements once every month.
- Protection from Fraudulent Activity:
Credit card replication, scam calls & identity thefts have become rampant in most parts of the world. Bank Statements provide a list of all the charges incurred by the account holder, along with their dates & payees. Account holders can review these charges, and notify the bank regarding any fraudulent transactions that they have not engaged in, within a 30-60 day period from the transaction.
- Proof of Purchase:
Bank statements also act as proof of purchase, which can be important to file product warranty or replacement requests.
- Taxation:
Bank statements contain a list of payments, loans, fees, etc that need to be accounted for while filing for taxes.
- Credit Verification:
Bank statements are also important to analyse an applicant’s credit score while sanctioning loans. Most banks require bank statements going back 2-5 years to calculate the credit score & interest rates of loan applicants.
How long should you keep Bank Statements?
Answer: Minimum 1 Year
But it’s not that simple. There are various types of bank statements, presented by different banks, in different states & countries. Account holders need to abide by the different financial & regulatory guidelines presented to them across various parts of the world.
Here is our complete guide on how long you should keep bank statements:
Documents You Should Keep A Month:
These include payment stubs, purchase receipts for day-to-day items, monthly account statements, credit card receipts, etc. These documents are essential to verify monthly expenditures & the accuracy of Form W-2 during tax season.
Documents You Should Keep A Year:
These include all kinds of utility bills (phone, cable, internet, electricity), business expenses (salary receipts, rent receipts, maintenance payments), etc. The general rule of thumb is to hold onto any & all documents that account holders might need to verify their annual tax filings. Account holders also have the option of discarding such physical receipts after securing confirmation of the payments for the bills.Account holders that have cross-verified their transactions with their accounts can request a digital bank statement from their banks, which the bank is obliged to email to them within the next few days. It is important to note that most banks only keep bank statements for 1-3 years, depending on the bank & its location.
Documents You Should Keep For 3-7 Years :
Tax returns are important financial documents that describe a bank account’s monetary history. Account holders need to maintain a digital or physical record of their tax returns for at least 3 years. In case the account holder files for default payment (bad debt) or worthless securities, it is advised to keep the tax returns for up to 7 years.It is also essential to maintain supporting documents of high-value transactions, to verify the sale or purchase as per the bank statement. These can include inheritances, brokerage receipts, tuition payments, donation receipts, etc. Account holders that haven’t filed for taxes or have filed fraudulent returns should hold onto their bank statements & supporting documents indefinitely.Some other documents that need to be held onto for more than 3 years include home & car insurance policies, employment tax records, home improvement records, etc.
Note:It is extremely important that bank statements, both hard copy & digital, be disposed of in a secure way to protect against the leaking of critical personal & financial information of the account holder(s).
How can we help you manage Bank Statements?
Our document management system GLOBODOX provides features that can help you manage, store & dispose of important financial documents like Bank Statements in a secure & comprehensive way.
GLOBODOX’s advanced organizational & search features move away from the traditional ‘folder’ storage approach & allow you to segregate bank statements into easily searchable groups, based on categories like bank’s name, statement’s date, amount, name of the product/service purchased, etc.
GLOBODOX also provides document archiving, which lets users select a date on which they would like important documents to automatically be moved to the restricted ‘Archive Database’. Archiving documents protected them from getting edited or deleted.
Another feature ‘Expiry Date’ lets users choose a date on which they would like the documents to automatically be moved to the system’s recycle bin, thus reducing clutter & decreasing the time it takes to manually find & delete old financial documents.
If you’d like to know more about GLOBODOX’s features & pricing or take our 30-day free trial, visit www.globodox.com or write to us at sales@globodox.com
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