What is a bank statement, aside from a piece of paper showing how much money you have? In short, it's a snapshot of your banking activity during a specific time frame, typically a month.
Most banks send a copy of your bank statement by mail or through online paperless statements for review each month — and many people don't pay attention to theirs. Here are 10 reasons why you should start reviewing your bank statement each month and stop ignoring it now.
1. Applying for a Home Loan
When you're applying for a mortgage, you'll have to submit a copy of your bank statement to verify your income. Mortgage lenders take your income and credit score into consideration when determining whether to approve you for a loan and what interest rate you'll get.
Your bank statements show how much income you have, how stable it is and where it comes from. All this information will give lenders a good idea of what kind of borrower you are.
2. Filing Your Taxes
If you claim itemized deductions on your taxes, you need a record of how much you spent and on what. If you don't have itemized receipts for every purchase, your bank statements and credit card statements can serve as backup. You don't need to submit receipts or bank statements when you file, but if you get audited, you'll be happy you have them.
3. Using the Free Application for Federal Student Aid
Free Application for Federal Student Aid, also known as FAFSA, is a form used annually to determine your eligibility for financial student aid. But before you start filling it out, gather important information like your W-2s and bank statements. The U.S. Department of Education also uses these documents to determine how much aid you'll receive if you're deemed eligible.
4. Disputing a Credit Report
It's your responsibility to fix any errors on your credit report. To dispute a credit report error, you'll have to contact the credit reporting bureaus and your creditor — and provide details about the error. To support your claim, you might need to provide copies of your bank statement, which would show payments that perhaps were not reported.
5. Applying for a Car Loan
Whether you're applying for dealer financing or a car loan through a third-party lender, you'll need to provide proof of income. Although your recent pay stub is an option, your bank statement can also prove you have sufficient, steady income. If you're self-employed and applying for a car loan, a lender might require you to provide three months' worth of bank statements.
6. Creating a Budget
One of the best things you can do for your financial future is to create a budget and stick to it. Referring to your bank statement to see your spending history can help you plan and track your budget.
7. Renting an Apartment or House
Renting an apartment or house is essentially the same as taking out a loan: You're agreeing to pay rent every month under certain terms in exchange for a place to live. Landlords need to be assured their tenants can adhere to the financial terms of renting. Pay stubs, recent bank statements and W-2s can prove you have the income to make your rent payment each month.
8. Qualifying for Your State Medicaid Program
State programs offer medical coverage for disabled, elderly and low-income individuals. Because this is an income-based program, there are limits on how much you can earn and remain eligible for coverage. To qualify for this coverage, you'll need to submit your bank statements.
9. Filing for Divorce
When you file for divorce, you must turn over documentation that lists your shared and individual assets. Couples often have disputes over assets during divorce proceedings; your bank statement is a good way to show your current financial status.
10. Refuting a Transaction
If you don't review your bank statements you might not notice unauthorized charges or transactions — and you could end up paying for them. For instance, you could see a check that was cashed on your account that you don't remember writing. Should that happen, your bank statement would show the check image with your signature on it, which could serve as proof of fraud if it's a false signature.
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Although your bank statement might seem like an unnecessary piece of paper — or virtual document — it can be useful in many situations. Not only can it help you make sure your account balance and transactions are accurate, it can serve as proof of income, so carefully review yours every month. If you don't know how to get a bank statement, contact your financial institution for help.