Bank statement basics

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Your monthly bank account statement gives you a detailed review of the activity in your account for a specific period of time. It’s your best opportunity to make sure your records match the bank’s.

Check the statement

When your statement arrives, look near the top of it for the starting and ending dates — the period the statement covers. Get your checkbook register and be prepared to match up every debit and credit on the statement with your register.

It’s crucial that you review it in a timely fashion because if there are any discrepancies you need to report them to the bank. For questions about ATM, debit cards, point-of-sale debit transactions and other electronic banking transactions that involve cash being withdrawn from your account, you have 60 days from the date of the periodic statement to report it to the bank or the bank has no obligation to conduct an investigation.

Discrepancies with paper checks don’t have those time restraints, but you should get them resolved speedily too. Another important reason to reconcile your checkbook with the statement is to look for debits you didn’t make that might indicate an identity thief has gotten access to your account.

Summary is important

Most statements show a summary near the top of the first page. It condenses the status of your account: the beginning and ending balances for the statement period, total deposits, total withdrawals, service fees, etc.

The summary gives 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 $800 in your account and the summary shows $250, you may have a problem.

Maybe a deposit hasn’t been credited yet, or maybe the bank made an error. More often it goes the other way — the balance is higher than what is in your checkbook register because you’ve written checks beyond the period covered in the statement. The summary will at least warn you to pay close attention as you review the statement.

Transaction description

A prominent section of the statement is the transaction description. It details account activity — deposits, withdrawals and fees.

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 have — such as free checking or an interest-bearing account, etc.

An interest-bearing checking account earns interest, but might require maintaining a hefty minimum balance. A free account generally doesn’t pay interest, but it also doesn’t require a minimum balance. If you initially signed up for an interest-bearing account but now realize the interest earned isn’t worth maintaining that balance, tell the bank you want to switch.

Fees charged

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

Common ones are an account maintenance charge, which is a fee you pay for simply having the account, or a nonsufficient funds (NSF) fee, which slams you if you don’t have enough money to cover a check. If there’s a miscellaneous charge for $10, check the statement for details. If you can’t find an explanation, call your branch.

By tracking fees, you’ll discover whether your bank is nickel and diming you with charges. If that’s the case, make good use of Bankrate’s research and find a more cost-effective checking account.

Processing checks and payments

Check the statement to see how your checks are listed. It could be chronologically or by date paid or both. Understanding how checks are listed makes it easier to reconcile the account. Ideally, the bank will list canceled checks in a way that’s convenient for you and allows you to quickly see whether your checking account is in order.

Be aware that checks that are processed electronically may show up in a different section of the statement from the checks that were processed as paper throughout the system. If your bank separates ATM and debit card payments, checks that are processed electronically may be grouped with them.

If you occasionally bounce checks, it’s a good idea to ask your bank how it processes checks. In the course of a given day, some banks will first process the check for the largest amount rather than processing the one that arrived first that day. Why? If the bank pays the largest checks first, the odds increase that you’ll run out of money and the bank will earn a hefty fee if a check bounces. Banks say they do this because larger checks tend to be for more important payments, such as the mortgage or car payment, and the bank figures you don’t want those checks bouncing.

Access to your deposits

Also ask the bank about its policy for crediting checks deposited to your account. There are federal guidelines regarding how long banks can hold deposits before giving you access to the money. The bank needs to make sure the check clears, but you don’t want the bank holding the check any longer than necessary. For instance, the bank can hold certain checks for five business days. If your check clears in three, there’s no reason for the bank to hold it longer than that.

Coming up in the next section, we’ll look at why financial institutions are so nosy — and what you can do to protect your privacy.