“A bank statement is a record, typically sent to the account holder every month summarizing all the transactions in an account throughout the time from the previous statement to the current statement. The opening balance of the previous month added to the total of all transactions during the period results in the closing balance for the current statement”. Investopedia.
“A bank statement or account statement is a summary of financial transactions that have occurred over a given period on a bank account held by a person or business with a financial institution”. Wikipedia
Most bank customers don’t know how to read their bank statements and they never take the time to learn how to do it. Most people just throw out their statement or delete them from their mails once they get it from their bank.
Here is a chance to learn how to read your bank statement and you will discover that it is not as difficult as you think and one more thing knowing how to read your bank statement will do to you is that it will make you feel good about your finances.
Here are six tips for you
1. Account details:
The very first thing to do once you get your bank statement is to check that the details of the account. Check the account number and the account name to be sure you are reading your statement of account.
Most bank emailed statement have been encoded so that it is only your account number that can open it but you still need to confirm that you are about to read your account statement by first confirming the account details on the bank statements you got either by email or by the post.
2. Statement date
The very next thing to do after you have confirmed that the statement of bank account that you got is for your account is to check the date the statement covers.
Bank statement are sent to customers every month but there are also quarterly statement and yearly statement. Confirmation of the date will guide you on what period of your financial history the statement is about as this is critical to the bank balances.
3. Account balances
Most banks statement will give you a snapshot of your account by providing the opening and closing balance, there is the uncleared and cleared balance. The balance column is also very important.
Opening balance shows the balance in your account at the beginning of the month or beginning of the statement period while closing balance gives you the balance in your account at the end of the period the statement covers.
Cleared and uncleared balances refers to cheque/s you paid into your account. When cleared, it means that the Cheque has gone through clearing successfully and this will form part of your closing balance otherwise the Cheque is still in clearing and the value will not reflect in your closing balance.
The balance column shows the balance after every debit or credit transaction consummated on your account.
4. Deposit details
All deposits during the statement period are in a column, deposits includes cash and Cheque lodgments including interest paid to you by your bank during the period covered by the statement. You will be able to verify all cash and cheques that were paid into your account during this period including the much interest the bank has paid into your account if your account is interest bearing.
This column will also contain reversals of excess charges, wrong debits now reversed and all other credits into your accounts by the bank. The narration part will let you know what the amount credited into your account is for.
5. Withdrawal details
All withdrawals during the period covered by the statement are in another column. Funds paid from your account to a third party including your personal cash withdrawals are in this column.
This column contains charges debited into your account by your bank, AMC and statutory charges like VAT on Account Maintenance Charges, Stamp duty charges, withholding Tax and other statutory charges. The column also contains reversal of wrong credit into your account and all other withdrawals due from your account.
6. Bank charges
This is the most important reason to check your bank statement the financial finicky person would say. All charges can be found in the withdrawal column of your statement of bank account. Bank charges includes Account Maintenance Charges (AMC), VAT on AMC, Stamp Duty Charges, Withholding Tax and all other bank charges.
Read also: How to maintain better banking habit