In 2024, statistics show that nearly a third of card-holders have been hit by credit card fraud. With the average American making 23 card transactions each month (that's over 200 per year), scrutinizing and managing your credit card statements is your frontline defense against being scammed.
Even apart from fraud, neglecting credit card statements can be a costly oversight. Unnoticed errors, hidden fees, or fraudulent charges can quietly erode your finances.
The good news is that effective statement management doesn't require a finance degree.
With a systematic approach and a few key strategies, you can use your monthly credit card statements as a powerful tool for tracking spending, detecting errors, and protecting your financial health.
This post lays out all you need to know about keeping, reviewing, and leveraging your credit card statements to optimize your personal financial management.
Let's get into it.
Why It’s Important to Manage Credit Card Statements
Did you know that nearly 35% of your credit score depends on your payment history?
Credit card statements aren’t just records of your spending—they’re your first line of defense in maintaining financial health.
Here's a list of the financial functions that managing credit card statements effectively enables you to accomplish:
- catching unauthorized charges
- spotting billing errors
- ensuring you never miss a payment
- tracking your budget
- flagging tax-deductible expenses
When it comes to your personal finances, reviewing and managing your credit card statements regularly can thus help you attain the following crucial milestones:
- Seek and obtain fair redressal for financial errors and injustices
- Protect your finances from criminal activity
- Build/ rebuild creditworthiness
- Monitor and improve financial health
By keeping an eye on your credit card statements, you’re taking a small but powerful step toward better financial management.
How Long Should You Keep Credit Card Statements?
The length of time for which credit card statements ought to be retained depends on the purpose for which they might be referenced.
This section provides a quick breakdown of the most important reasons for which old credit card statements may be, as well as the recommended timeline for retention in each case.
- Everyday Monitoring of Personal Finances
- Recommended retention period: At least 60 days
- Reasoning: Use this time to review statements for unauthorized charges or errors. For example, if you notice a charge for a subscription you canceled, you can dispute it within this window.
Here are some strategies you can use to get the most juice out of the time and effort you invest in reviewing credit card bills:
- Cross-check statements against receipts or actual purchases, particularly for bigger transactions (for example, over $300); this helps to verify charges and detect fraud early.
- Flag recurring charges (e.g., subscriptions) and assess if they’re still needed; unnecessary expenses can otherwise slip through the cracks and add to your financial burden.
- Set up automatic alerts to track spending near your credit limit; this serves 2 purposes–avoiding over-limit fees and tracking your budget.
- Purchase Verification
- Retention Period: Until warranties or return periods expire
- Reasoning: Statements can serve as proof of purchase if original receipts are lost.
Example: If your double-door refrigerator’s compressor begins malfunctioning in its 4th year, but the original receipt is mislaid, your credit card statement showing the date of purchase may suffice for the manufacturer to honor the 5-year compressor warranty.
- Tax Purposes
- Retention Period: 3 to 7 years, depending on the situation
- Reasoning: Whether you need to retain statements for only 3 years or keep them for a 7-year period depends on your financial and tax situation. Use the section below to identify where you fall along the spectrum.
3-Year Rule:
For a regular tax-payer reporting all income, the IRS typically requires you to keep records for 3 years from the date you file your return. This covers most routine audits where the IRS reviews income and deductions for accuracy.
6-Year Rule:
If you suspect you might have under-reported your income by more than 25%, be aware that the IRS can audit you for up to 6 years. This is frequently true of the following income profiles:
- small businesses with a high volume of cash transactions (for example, a food truck)
- gig workers (for example, musicians, baby- and pet-sitters, freelancers)
- businesses that have standing arrangements for swapping services.
Thus, if you earn $10,000 but report only $7,500, the longer audit window applies.
Indefinitely
If you know or suspect that:
- some of your transactions might be fraudulent, OR
- you have not filed tax returns for 1 or more years,
be aware that the Statute of Limitations no longer applies to you.
This means that the IRS can audit you at any time between now and forever.
The “7-year recommendation”: What is it and why should you care?
While not legally required, many CPAs and financial experts recommend keeping tax-related credit card statements for 7 years as a precaution. This ensures you're covered for the 6-year rule and provides a 1-year buffer for safety. It’s a practical measure, especially if you’re unsure whether certain expenses might raise red flags.
Example 1:
If you deduct business travel expenses charged to your credit card, retaining those statements for 7 years safeguards against potential audits.
Example 2:
If you report a laptop purchased with your credit card as a work-related expense, keep the statement supporting that deduction for at least 7 years.
Pro Tip: Store statements electronically to avoid clutter and ensure easy access when needed. Many credit card issuers let you download PDFs of past statements for up to 12 months, and some go back as far as 7 years.
Disposing of Old Credit Card Statements
When it’s time to dispose of outdated credit card statements, it’s essential to do so securely to protect your personal information. Here are the best strategies for disposing of sensitive personal documents safely.
- Shredding (for Paper Statements)
While shredding has long been the #1 strategy recommended for secure document disposal, there are added precautions you can take when it comes to your financial details:
For maximum security, use a cross-cut shredder. This ensures that sheets with sensitive details like your account number or payment history are shredded into small fragments instead of the long strips generated by a regular shredder.
- Eco-Friendly Method A: Pulping
Soak documents in water mixed with dish soap for a couple of hours. This turns them into unreadable pulp. The pulp can then be dried and dropped off for recycling, or even composted in the garden.
- Eco-Friendly Method B: Redaction + Disposal
A more time-consuming but effective method is to separate the sections with sensitive information and manually shred these into tiny pieces. This can be by either tearing or cutting up these sections with scissors.
The fragments can then be discarded separately, while the bulk of the credit card statements can be discarded in a regular bin, after ensuring that there are no identifiable personal details.
- Digital Statement Disposal
For files stored on digital devices, follow the steps below:
- Delete all credit card statement files stored on your devices.
- Empty the recycle bin or trash can on your computer.
- Find and delete temporary copies of the files on your computer; there is usually a folder named ‘Temp’ (Windows) or ‘TMP’ (Macs) which contains temporary (*.tmp) files.
- Ensure cloud backups are removed if no longer needed.
Managing Credit Card Statements of Deceased Persons
Handling the financial records of a deceased person, including their credit card statements, requires care to avoid potential issues like unauthorized charges or disputes. This section lays out the important elements to keep in mind.
- Be Alert for Outstanding Balances
- Notify credit card companies of the death promptly to prevent further charges and freeze the account.
- Review statements for unpaid debts.
- Determine if there are joint account holders; if another person is listed on the account, they may still be liable for the balance.
- Watch out for recurring charges that need to be canceled.
- Monitor for transactions made after the deceased’s date of death, which could indicate fraud or misuse.
- Retention Period
- Keep statements for at least 3 years after filing the deceased’s final tax return.
- Retain them longer (up to 7 years) if the estate is large or complex, as extended IRS audit periods may apply.
- In case of suspected fraud, be prepared to store statements and other relevant documents indefinitely, as the Statute of Limitations no longer applies.
- Protect Sensitive Data
- Ensure all online accounts are closed or transferred, and download necessary documents before deactivating access.
- Store hard copies of statements in a locked file or safe until they are no longer needed.
- Dispose of old statements securely (shred or soak) to prevent identity theft of the deceased’s information.
- Watch for phishing attempts targeting the deceased’s accounts and personal information, as fraudsters often exploit bereavement periods to commit identity theft.
Tip: Consult an attorney or financial advisor for guidance on the best methods to deal with the deceased’s financial obligations and documents, particularly in case of larger or more complex estates.
FAQs About Credit Card Statement Management
- How Far Back Can the IRS Audit You?
The IRS can audit you:
- 3 years for most cases
- 6 years if you have under-reported income by 25% or more
- indefinitely if fraud is suspected or tax returns have not been filed
- How Should I Dispose of Old Credit Card Statements?
- Shred them, ideally using a cross-cut shredder, OR
- Soak them in a dish-soap solution to where they are illegible pulp
- Manually redact (remove) sensitive sections, then tear or cut them up
For digital records:
- delete files
- empty recycle bin
- remove (delete) temp files
- clear backups
- Should You Shred Old Credit Card Bills?
Yes, shredding is the most secure method to prevent identity theft. Eco-friendly alternatives like soaking in water are also effective.
- Is It Safe to Throw Away Old Credit Card Statements?
No, throwing them away intact risks exposing personal information. Always destroy them first.
- How Long Do You Keep Credit Card Statements After Bereavement?
Keep them for at least 3 years after the final tax return, or longer if estate complexities arise.
Next Steps
With this info under your belt, you're all set to begin using your credit card statements as a trusty aid in paving the way to greater financial stability.
By sticking to these 3 mantras–review regularly, retain wisely, dispose securely, you can stay in control of your finances and protect your identity.
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