The Bank Statements
Posted by BANKUS on April 03rd 2018
The rule of thumb for the majority of the people is to keep 3 years of bank statements, just in case you are audited or challenged by the law or a financial department such as creditor. Some people destroy bank statements after one year, or immediately as they receive them through the post, to prevent their financial information to be stolen and ultimately used unlawfully.
Although identity theft and loss of financial documentation is something one should worry about, it is also wise to keep bank statements for longer and safely. Your bank may provide you with archived statements online or on paper (but it may charge you a fee to issue you a new set of hard copies). But why are bank statements so important?
Below are the top 10 reasons why you should start reviewing your bank statement each month and and create a safe storage plan for at least 5 years.
1. Applying for a Mortgage
When you apply for a mortgage, you'll have to provide a copy of your bank statements to verify your income and savings. Mortgage lenders take your income and credit score very seriously when deciding whether to approve you for a loan and what interest rate they will provide you with. Your bank statements show how much income you have, how stable it is and where it comes from as well as your monthly expenses. All this information will provide financial companies a good idea of what kind of borrower you are.
2. Reporting Taxes
If you claim itemized deductions on your taxes, you need records of how much you spend and on exactly what. If you don't have itemized receipts for every deal and transaction, your bank statements and credit card statements can serve as backup to show the money flow. You don't need to provide receipts or bank statements when you apply, but if you get audited, you'll need to back up your claims and you will certainly need your bank statements.
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 chek your eligibility for financial student aid. But before you start applying, you will need your W-2s and bank statements. The U.S. Department of Education also uses these documents to decide how much help you'll receive.
4. Disputing a Credit Report
It's your responsibility to check any errors on your credit report. To dispute a credit report error, you need to contact the credit reporting bureaus and your creditor — and provide details about what is wrong. To back up your claim, you may need to provide copies of your bank statement, which could show the payments that perhaps have not been declared.
5. Applying for a Loan
When you apply for a car loan through a third-party lender, you'll need to provide proof of income. Although your recent pay stub can be an option, your bank statement can also prove you have enough, steady income. If you're self-employed, a lender might ask you to provide three months' worth of bank statements or more.
6. Planning a Budget
One of the best approaches you can do in regards your financial future is to create a budget and keep to it. Referring to your bank statements to check your spending history can help you plan and stay on your budget.
7. Renting an Apartment or House
Renting an apartment or house is almost the same as taking out a loan: You're agreeing to pay rent every month under certain circumstances in exchange for a place to live. Landlords need to know that their tenants can handle and follow the financial terms of the renting. Pay stubs, bank statements and even W-2s can show that you have enough income to support your rent payment each month.
8. Applying for Your State Medicaid Program
State programs offer medical coverage for disabled, elderly and low-income people. Because this is based on an income program, there are some limitations on how much you can earn and still eligible for coverage. To be approved for this coverage, you'll need to submit your bank statements.
9. Filing for Divorce
When you file for divorce, you must provide documentation that lists your shared and personal assets. Couples often have disputes over assets during divorce proceedings; your bank statements are a good way to show your current financial status.
10. Disputing a Transaction
If you don't check your bank statements frequently you might miss unauthorized charges or transactions which you could end up paying for. For instance, you could see a check that was debited from your account that you don't remember writing. If such happens, your bank statement would show the check image with your signature on it, which could serve as proof of fraud if that was not you who have signed it.
Although your bank statements might feel like unnecessary pieces of it can be useful in many situations. Bank statements can help you in regards the accuracy of your account balances and transactions. Bank statements can also serve as proof of income and savings.