Let’s be honest, we have all fallen victim to the electronic paperless age. We have all clicked the “go paperless” button on one of our financial accounts. We have all left our statements sitting on our desk for months. Even if we did have the time to open the statement we simply flipped to the back page and looked at the account total to see if it remotely matches what we last saw online. The truth of the matter is that statements are there to protect us from fraud and from ourselves. Understanding and studying our account statements is an important part of understanding our personal finances.
The main use of account statements is to provide a written record of a fiduciary (your financial institution) holding your money. When you gave your cash to the bank, somewhere in the 15 pages of account agreements they promised to account for and inform you of the transaction history. Why is this important? Simply put, someone else (the financial institution) is holding your money! It may seem trivial in this age, but 100 years ago most people kept their money at home and accounted for it themselves.
Statements provide protection against fraud. In 2014, CNBC reported that credit and debit card fraud cost the banks and consumers $11 billion dollars in one single year. The thieves are getting smart about it too. What used to be a large spending spree for the thief until the card was shut down has turned into a tactical game where the thieves spend small amounts at Walmart or Target making the transaction look “normal.” If you do not examine each transaction on your statement you won’t not even realize you weren’t really not at the store the day that transaction happened.
Statements provide protection. Recently, a friend of mine downloaded an App on his phone to pre-pay for coffee. He got reward points each time he paid with his phone. Seemed like a good idea. However, when putting in his credit card for the saved payment information for the $50 pre-payment transaction the App reported an error. Trying numerous times he finally gave up and went about his business. Come to find out, after careful examination of his end-of-the-month credit card statement, his card had been charged each time he hit submit. He had $800 in coffee pre-payment charges. If he had never examined his statement, he may have missed the additional charges and paid the balance anyway.
It is safe to say we’ve all become relaxed in our financial management. Technology makes it so easy to log-in and quickly view our balance and track our spending. Many of us don’t keep track of our daily transactions; we simply check the balance online to make sure we can spend what we need to the next day. Examining your monthly statements builds good habit patterns. By examining statements you begin to understand where and what you are spending our money on. However, you are building a mental financial picture and that is a good thing.
Statements protect us from fraud, our own spending, and even help us build good financial habits. By taking the time to carefully review and understand your account statement you are learning about yourself, you are auditing our spending, and you are making sure no one else is spending your money.
Take the extra 5 to 10 minutes to review account statements. It can save you money in good spending habits and in fraudulent charges you may have otherwise missed.
Jonathon Rowles Captain, USMC (Ret.)
Disclaimer: (have to do it) – This blog should not be considered financial, investment, legal or tax advice. Consult your licensed financial professional, tax advisor or legal counsel. This blog is for educational purposes only.