Managing your finances can sometimes feel overwhelming, but simple habits can make a huge difference in your success. One of these is reviewing your bank account statements regularly. A bank statement is more than just a list of your monthly financial transactions – it’s a handy tool that can help you monitor your spending, follow your budget, and even spot signs of fraud.
However, reading and understanding bank statements can be challenging, as they’re packed with financial jargon that might go over your head. In this guide, we’ll help you make sense of bank statements and show you how to use them to make savvy financial decisions.
What is a bank statement, and how does it work?
A bank statement is a list of the financial transactions that occurred in your bank account over a specific period, usually a month. You can think of it as your financial diary, showing you where your money came from and where it went. Some examples of transactions you can find on a bank statement include paycheques, GST rebates, tax refunds, phone bill payments, utility bill payments, and banking fees.
All financial institutions issue bank statements to customers electronically, though you can also request a paper copy. Here is an example of a bank statement from RBC.
What information does a bank statement contain?
Below is a list of the information a typical bank statement contains. Let’s take a look at what all of it means (we recommend pulling up your bank statement to help you identify and understand each section):
Personal information. Personal details that appear on your bank account include your name and address. Your phone number may be listed as well.
Branch address. This is the address of the branch where you opened your bank account.
Account number. This is your account number, which identifies your bank account and allows you to make transactions. It consists of three parts: transit number, institution number, and account number.
Statement period. This is the time frame the statement covers. Usually, this period is one month, but some banks issue statements every quarter.
Balance forward/opening balance. This number shows you how much money you had in your account at the end of the previous month. The opening balance should always match the closing balance of last month’s statement.
Balance. This number appears on the top right-hand side of the statement. It’s a running total of money in your account. With each transaction, the balance adjusts. When money goes into the account, the balance increases and vice versa.
Withdrawals (Debits). Transactions that appear in the Withdrawals column represent money coming out of your account. Some examples are:
- ATM withdrawals. Refers to physical cash you take out from an ATM.
- Interac fees. You pay a fee when you take out cash at an ATM that doesn’t belong to your bank.
- Account transfers. This is money you transferred to another account, such as an RRSP, GIC, or savings account. You can set up these transactions to occur automatically or do them manually.
- Credit card payments. These are transfers from your bank account to pay your credit card balance. As with account transfers, you can set up these transactions to occur automatically or perform them manually.
- Debit payments. These are retail purchases you make using your debit card in person. You’ll usually see the name of the merchant on your statement.
- Online banking payments. These are payments you make online through your online banking app or desktop. You’ll usually see the name of the merchant on your statement.
- Pre-authorized payments. These are payments where you’ve allowed the biller to withdraw funds from your bank account when payment is due. Some examples include utility bills, phone bills, and streaming services. These transactions occur automatically.
- Cheques you’ve written. Once the recipient deposits a cheque that you wrote, the money leaves your bank account. These transactions are usually listed as “Chq” followed by the cheque number.
- Loan payments. Loan payments you make to your financial institution will appear as direct withdrawals with a description of the loan type.
- Monthly fee. This is the fee charged by your financial institution to maintain your account.
- Overdraft fee. If you’ve spent more money than is available in your bank account, your financial institution may charge you an overdraft fee.
- NSF fee. An NSF (non-sufficient funds) fee is a penalty your bank charges you if you don’t have enough money in your bank account to cover a transaction.
Deposits (Credits). Transactions that appear in the Deposits column represent money coming into your account. Some examples are:
- Payroll deposit from your employer. These transactions should appear on your bank statement regularly and always match your pay stub.
- Interest earned. If your bank account pays interest, you’ll see the monthly amount listed here. The amount will fluctuate based on general interest rates in the economy and the rate that your bank pays.
- Account transfers. This is money you’ve received from another account, such as an investment or trading account.
- Cashback. This is cashback you collect on your bank account or a credit card associated with your financial institution. Most of these rewards programs allow you to set up automatic cashback deposits.
- Government benefits. These transactions include money received from sources like the Canada Revenue Agency (CRA), Canada Pension Plan (CPP), Old Age Security (OAS), and Canada Carbon Rebate. Usually, they appear as direct deposits with a description that indicates what the payment is for.
Closing Balance. This figure shows how much money was in your account at the end of the month. It will appear as the opening balance on the following month’s statement.
Note: A situation that we’ve seen (and experienced ourselves) is when you deposit a cheque into your account – but the money is not “available” for several days. Sometimes called ‘Funds on Hold,’ your bank won’t allow you to withdraw the money from your account until the cheque has cleared. Usually, banks do this to ensure the deposit is legitimate and protect against fraud. However, you can generally access a small portion of the money from the cheque immediately. Contact your bank to learn about their cheque hold policy. As an example, here’s TD’s hold policy.
Why it’s important to understand and review your bank account statements
Here are some reasons why reviewing your bank statement is a good idea:
Helps you monitor spending. Inspecting your monthly spending patterns allows you to identify areas where you are doing well and where you can cut back. For example, you may spot charges for a subscription service you meant to cancel but forgot. Or, you may realize you’re dishing out too much cash on restaurant meals each week.
Ensures important bills get paid. Paying bills on time is the best way to maintain or improve your credit score. By checking your monthly bank statement, you can make sure that credit card bills, utility bills, and other essential expenses are paid on time, every time.
Helps you stay on budget. Reviewing bank statements allows you to compare your actual expenses against your budget to see how you’re doing. Rather than using spreadsheets and calculators, you can connect your bank statements to budgeting apps to simplify the process. Just be sure you do it safely to avoid exposing your banking details to criminals.
Detect fraud early. It’s no secret that financial fraud is a problem in Canada. Thieves can steal your identity, credit card details, and banking information to make unauthorized purchases at your expense. Regularly scanning your bank statements can help you catch fraudulent transactions and take action to reverse them.
Identify errors. While rare, transactional errors occur. For example, you might discover that you’re not earning a rebate on your banking fees as promised by your financial institution. Or, you may notice that a payment you’ve made has gone through twice. You can catch and resolve these mishaps quickly if you review your bank statements monthly.
Avoid overdrafts. Staying on top of your balance will help you avoid triggering overdraft fees and bounced payments. When you know how much money you have sitting in your account, you can plan your payments strategically.
Reasons you may need to get a copy of your bank account statements
Besides helping you make good financial decisions, monitor your spending, and detect fraud, there are other scenarios where you might need a copy of your bank statement.
- Applying for a mortgage or other loan. Lenders often ask borrowers for several months of bank statements as proof of financial stability.
- Preparing and filing a tax return. If you own a small business or work at home, bank statements can help you identify deductible expenses and verify income.
- Disputing a transaction. If you notice an error or unauthorized charge in your bank account history, a statement is crucial evidence to have the transaction reversed.
How to get your bank account statements
There are several ways you can obtain bank account statements:
Online. The fastest and most flexible way to access bank statements is through your bank’s online portal or mobile app. Simply log in to your account to view and download your statements. Usually, they’re pretty easy to find and you can view statements going back 7 to 10 years. If you’ve opted in to receive electronic statements, your bank will also email them to you monthly. Here’s an example of how to set up your account to receive electronic statements from BMO.
By mail. Despite the popularity of online banking, financial institutions still mail paper statements to customers. However, you may need to formally request this service by calling the bank, visiting a branch, or changing your preferences through your online banking account.
Automated machine. Some ATMs allow you to print statements that cover the latest statement period. However, you typically need to pay a fee for this service.
In-branch request. If you prefer to do your banking in person, visit your local branch and ask the customer service representative for a printed copy of your statements. As with an ATM statement, there may be a fee.
The bottom line on bank account statements
By making it a habit to review your bank statements, you can track your spending and ensure you stick with your budget. As a result, you’ll make smarter financial decisions and feel confident in managing your money. And that includes avoiding debt problems. Learn more about managing your money with our budgeting guide.
