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Anatomy of a checking statement

You've committed to watching your checking account more closely. So where do you start? By getting to know your monthly account statement.

While each checking statement can vary according to the specific kind of account and your bank, there are some basic entries to keep an eye on. Unusual transactions in any of them can be a red flag alerting you to account trouble.

Get an overview
When your statement arrives, start by perusing the summary. It's usually listed at the top of the first statement page and condenses the state of your account: balance (previous and current), deposits, checks, service charges, etc.

This section will give you a good idea of whether venturing further into your account is going to be a walk in the park or a walk on the wild side. For example, if you think you have around $800 in your account and the summary shows there's only $256, you've got a problem.

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The reason for the discrepancy between your records and the bank's -- maybe that $400 deposit hasn't cleared or the bank really did make an error -- should be detailed further along in the statement. The summary will at least warn you to pay close attention as you read on.

Know your account type
Do you know what type of account you have? Make sure the bank does, too. Each statement should prominently display the type of account you hold.

You can have an interest-bearing checking account (great, you're earning interest on your balance), but that may also mean you have to keep a minimum balance. Or, you can have a pure-vanilla checking account, where there are no charges and no minimum balance, but you earn zero interest on your deposits.

By knowing what kind of account you have -- and making sure it's reflected properly on your monthly statement -- you'll know what else to look for. For example, if the bank unilaterally decides to upgrade you to a preferred status, your statement can alert you to that before you get in trouble for failing to keep the minimum balance. Similarly, you'll need to watch for account charges if the bank decides to alter its requirements for your particular type of checking account.

Find the fees
Make note of all fees listed on your bank statement. These may be listed separately, or included in the chronology of your account's monthly activity.

Common ones are an account maintenance charge (that is, a fee you pay simply for having the account) or NSF, which shows up if you didn't have sufficient funds to cover a check. If there's a miscellaneous charge for $10, check the statement for details. If it's not explained in the statement, call your branch to find out exactly why you're paying.

By tracking fees, you'll discover whether your bank is "nickel and diming" you with charges. If that's the case, your monthly statement can give you a head start in a search for a more cost-effective home for your checking account.

Watch how your checks are listed
Does your statement list checks chronologically or by date paid or by both? Make sure you understand how your checks are listed so you won't have any trouble reconciling your account. Ideally, the bank will list canceled checks in a way that's convenient for you and that allows you to quickly see whether your checking account is in order.

Play the date game: outgoing
Find out how checks are drawn against your account. Some banks will process the check for the largest amount rather than the first on the top of the pile. Why? If the bank pays the largest checks first, the odds increase that you'll run out of money and the bank stands to make money (see fees above) if you bounce a check.

Also look for the float differential. Float is the time between when a check is written, submitted by the payee and when the money is actually taken out of your account. Most statements show the issue date and payment date; this will give you an idea of how quickly money is moved out of your checking account.

Play the date game: incoming
Float also comes into play with deposits. Again, look at the date your statement shows you put a check in the bank when the full amount was available for your use. Many banks limit total access to deposited funds, sometimes for as much as a week depending on the size of the deposit, the type and the institution upon which it's drawn.

Do you see a pattern in how long it takes your checks and deposits to clear? This is important to know so you can keep your account balanced.

This pattern also can serve as a guide to the kind of service you're getting (or not) from your bank. If it seems some checks are posted sooner than others, or deposits take longer to register, call your bank for an explanation.

Knowing when your checks are paid and deposits are available can prevent you from overdrawing your checking account and facing some of those nasty fees discussed earlier. And it will help you find an account that works for you, not the bank.

Jenny C. McCune is a contributing editor based in Montana.

-- Updated: July 22, 2004


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