- Bank statements are necessary for loan applications and IRS audits.
- Store hard copies in a locked filing cabinet or digital copies in an encrypted folder.
- Banks are required to keep statements for five years, but you may want to keep yours for seven years.
A bank statement is a record of every financial transaction you've made from an account. It includes the dates and amounts of every deposit, withdrawal, and transfer made within a certain time period.
Having your bank statements on hand is not only helpful for tracking your spending and creating a budget, but is often necessary when financing a large purchase, such as real estate, or verifying tax information with the IRS.
How long should I keep bank statements?
Tax-related reasons
Patrina Dixon, CFEI, RFC, founder and CEO of It'$ My Money, recommends keeping any bank statements or other important financial documents for up to seven years in case you're audited. You may need account transaction information to verify your income, or make a case for claiming credits and deductions on a federal or state tax return.
Major purchases and loans
Lenders often require between one month and a year's worth of bank statements for loan applications. Generally, the larger the loan — a mortgage, for instance — the more financial documentation you will need to provide.
Storing bank statements
While financial institutions are required by federal law to keep customers' bank statements for at least five years, they may not be easily accessible to you. It's best to keep your own records as well.
Digital vs. paper storage
If you receive paper bank statements in the mail from your bank, collect and store them in a locked filing cabinet in a secure place at home. If you would prefer to minimize your paper trail, Dixon advises opting for online bank statements.
Be sure to download your statements as PDFs so you can access them without an internet connection. If you use a public computer, always clear the search history when you're done.
Keep your bank statements and other sensitive financial documents in a password-protected folder on your Mac or Windows PC. Dixon recommends installing anti-virus software if you're concerned about a potential security breach. And review your computer software periodically to ensure it's up-to-date.
If you're short on computer storage, consider storing your digital bank statements in an encrypted manner on Google Drive or iCloud.
Keep in mind most financial institutions, including the best banks, do not charge fees for receiving online bank statements. Some financial institutions charge fees for receiving paper statements.
Disposing of bank statements
Paper documents can be shredded when you are ready to dispose of them. Digital copies of bank statements should be deleted using specialized software. If you've encrypted and stored your documents on Google Drive or iCloud, follow the instructions for permanently erasing the files.
Other important documents to retain
Bank statements are far from the only financial documents you should keep for your records. You should hold on to your tax returns for at least three years and up to seven years in the case of a potential audit. However, a creditor or insurance company may ask that you present older tax returns, so it's a good idea to keep a secure digital archive of all of your filed returns.
Birth certificates, wills, medical directives, divorce decrees, and insurance policies are examples of other documents you should retain indefinitely. These can help financial advisors, attorneys, estate planners, and other professionals understand your finances completely and assist you with making legal and personal decisions.
Keeping bank statements FAQs
Why is it important to keep bank statements?
Bank statements are important to keep because they are required for some loan applications and may be necessary when verifying information on your tax return within the last seven years.
How long should I keep my bank statements?
You should keep bank statements for at least seven years, in case the IRS needs to verify transactions during an audit. If you have ample storage space, consider keeping them for longer.
What's the safest way to store bank statements?
The safest way to store bank statements is to keep digital copies in a secure, encrypted format. If you prefer to have hard copies of your bank statements, keep them in a locked file cabinet.
How do I safely dispose of bank statements?
To safely dispose of bank statements, paper statements should be shredded, and digital files should be permanently deleted using specialized software.
Can I just keep digital copies of my bank statements?
Yes, keeping digital copies of your bank statements is actually increasingly preferred to keeping physical copies. They can be printed if needed and don't take up space in your home.
