by Bob Berry

Instructions and Guidelines

Knowing how to read and use a bank statement is an important life skill.  A bank statement shows the detail of your bank account activities for one month.  These banking lessons shows how to use the bank statement.

Explore our youth financial literacy programs

The following activities are tracked by the bank: 

• Deposits
• Paid Checks
• ATM Withdrawals
• Bank Fees
• Transfers

The bank statement also shows the opening balance and the ending balance based upon the withdrawals and deposits made by the Account Holder. It will show the Account Number, and the Account Holder’s name and address.

 Keeping Your Account Balanced

There are a lot of helpful computer programs that make the process of keeping your checkbook balanced. But before you zoom onto that information highway, it is practical to know how to keep your bank records the old fashioned way, by hand.

The bank is allowed to take several days to make sure your deposits are valid. If you want to make sure the bank gives you immediate credit for a deposit, you must deposit cash. If you use a check, the bank is allowed time to verify if the check is good before making it available to you. Bank policies vary so you’ll need to ask your bank how they will credit your deposits.

Remember, the bank cannot read minds. If you write a check and mail it to pay one of your bills, the bank will not be aware of it until the payee presents the check to the bank for payment. Because of the delay on deposits and checks being presented for payment, you must balance your account every month.

If you do not understand how time and bank policies affect your bank balance, the bank charge you fees and this could ultimately hurt your credit. When you go to the ATM or pay with your debit card the money is taken from your account immediately.

Assume all your checks are up to date at the bank and that your deposits will take several days to show up in your account. This will reduce your chances of overdrawing. Anytime you make a payment with a check, buy with your debIt card, or make an online transaction, you must assume that money is gone immediately. When you make a deposit, assume that it will take the bank six or more business days to get the money into your account.

It’s a bad habit to go to an ATM or online to check your balance. That current available balance you just “verified” does not show transactions that have not yet been presented to your bank. If you haven’t accounted for bills that you’ve mailed but have not yet cleared the bank, you are gambling with your money and the odds are in the bank’s favor. And banks only bet on sure things.

If you overdraw and do not cure the overdraft, the bank can report that to the credit reporting agencies and proceed with legal measures to get their money. If you bounce a check, the person to whom you wrote the check can report that to the credit reporting agencies. Until you pay for that bad check, it will remain on your record. In many places, writing bad checks is a crime.

A lack of understanding of the banking process can have a profoundly negative affect on your credit and your life. Having an understanding about how a checking account works means you can manage your day-to-day transactions and, when things go wrong, use canceled checks to protect your credit.

Assuming you want to pay your obligations on time and as agreed, and assuming that you DO pay your obligations on time and as agreed, you want to be able to PROVE that you have paid your obligations on time and as agreed.

Every bank statement has a form on the back of it that is laid out to help you balance your checking account. It includes those deposits and withdrawals that the bank cannot validate or does not yet know about. Follow these five easy steps to reconcile a bank account: 

1. Compare your monthly bank statement against your checkbook, and put a check mark next to each transaction in your checkbook that is documented on your statement.
2. Find the ending balance on your bank statement.
3. Add to that ending balance any recent deposits that are not checked off in your checkbook.
4. From your new ending balance, subtract any recent withdrawals, checks, or debits in your checkbook that are not checked off.

This final number should match up with the ending balance in your checkbook. If not, go back and see where you may have missed a transaction or a calculation. It’s there, somewhere.