How to Properly Read a Bank Statement

A bank statement summarizes financial transactions and balances for a bank account over a defined period. It provides an overview of money moving into and out of an account. Understanding this document is fundamental for personal financial management, allowing individuals to track spending, monitor income, and reconcile records.

Identifying Account and Statement Details

The top section of a bank statement contains foundational information identifying the account and statement period. This includes the account holder’s full name and mailing address. The account number is also prominently displayed, often partially masked for security.

The statement period, also known as the cycle date, specifies the start and end dates covered by the financial activities listed. For instance, a statement might cover transactions from July 1 to July 31. Distinct from the statement period is the statement date, which indicates the specific day the document was generated or made available electronically.

Understanding Your Transactions

The core of a bank statement is the detailed list of transactions, recording every financial movement into and out of the account. This section features several columns. The “Date” column indicates when a transaction occurred or was posted to the account.

The “Description” column provides details about the nature of each transaction, helping account holders identify the source or destination of funds. Common descriptions include “ATM Withdrawal,” “Debit Card Purchase” often followed by a merchant name, or “Direct Deposit” for incoming funds like paychecks or tax refunds. For checks, the check number is usually listed, allowing for easy reconciliation with personal records. These descriptions are vital for understanding the purpose of each entry.

Transactions are further categorized into “Debits/Withdrawals” and “Credits/Deposits.” Debits represent money leaving the account, encompassing various outflows such as purchases made with a debit card, cash withdrawals, bill payments, or transfers to other accounts. Conversely, credits signify money entering the account, which includes activities like direct deposits from an employer, refunds from merchants, or incoming transfers. Each transaction also features an “Amount” column, indicating the specific monetary value of the debit or credit.

Reviewing Balances and Other Charges

At the beginning of the statement, a “Beginning Balance” is presented, which reflects the total amount of money in the account at the start of the defined statement period. This figure should precisely match the “Ending Balance” from the immediately preceding bank statement, ensuring continuity in financial tracking. At the conclusion of the transaction list, the “Ending Balance” provides the total sum of funds available in the account as of the statement date. This balance represents the cumulative effect of all transactions during the period.

Bank statements also itemize any fees and charges applied to the account during the statement cycle. These can include monthly service fees, which commonly range from $5 to $15 for basic checking accounts if certain conditions are not met, or ATM fees, typically $2 to $5 for out-of-network withdrawals. Overdraft fees, which can be around $25 to $35 per incident, are also clearly noted when an account balance falls below zero. Identifying these charges helps account holders understand their impact on the overall balance.

For certain account types, such as savings accounts or interest-bearing checking accounts, “Interest Earned” will be displayed, indicating any monetary gain from the account’s balance. This amount is usually calculated based on the average daily balance and the applicable interest rate. Additionally, many statements provide summary totals for the period, showing the grand total of all debits and all credits separately. These summary figures offer a concise overview of the total money movement for the entire statement cycle.