Hard Copy or Paper Financial Statements – Benefits and Risks

Every bank and financial company is now offering paperless statements. There are a lot of reasons for this. The biggest, of course is, is cost. But while paperless statements are good for the banks, are they good for consumers?

Benefits of Paper

The traditional bank statement is a paper bank statement. There are some serious benefits to the old method.

When you get a paper statement in the mail, it is a physical reminder that you have to look at your statement. You can sit down with your statement and a highlighter or pen and reconcile the statement to your checkbook or receipts. You don’t forget and it doesn’t get lost in a spam folder.

Paper is also good for record keeping. If you have statements going back for years, you can always grab it out of the file in case of a dispute. You have a hard copy record that will hold up in legal proceedings and you have a reference if you need it.

Benefits of Electronic Statements

Electronic files don’t use paper. They are instant and they are environmentally friendly. When you have to move, you don’t have a big file cabinet to worry about. Everything fits on a flash drive. You can archive back for years on your computer and have instant access whenever you have a question.

It is easy to remember when you need to download a statement. You usually get a reminder e-mail that your statement is ready.

Downsides of Paper

If you get paper statements, you are destroying the planet. Well, that is the first downside that comes to mind.

Outside of the green movement, paper is bad for two reasons: security and filing. One of the top identity theft methods is someone stealing bank statements out of your trash. When I worked at a bank, I saw this happen to our customers several times. It really sucks to say, “sorry, you should have used a shredder.” It is easiest to not have to worry about a shredder to begin with and not get the paper in the mail.

Storage is also a hassle with paper. You have to take time every month (or build a giant stack and file annually like me). I have a file cabinet that is stuffed full with bank statements. Moving it is not easy and filing and cleaning it out is time consuming.

Downsides of Electronic Statements

Despite the beliefs of old and uneducated people, identity theft from online banking is incredibly rare. When it happens, it is most likely the fault of the person downloading the files. Password theft and identity theft from online banking is nearly impossible if you have strong passwords and good virus protection. If you have a Trojan virus and no virus scan, you are in trouble. If you use an unsecured connection to download your files, you are just plain dumb.

The biggest security concern from electronic statements is the physical media you have the statements saved on. If everything is on an unencrypted flash drive and you lose it, whoever finds it gets your entire financial history. If you lose a laptop and it only has a Windows or Mac login password, you are out of luck. That is why I use NSA level encryption on my laptop and don’t put bank files on a USB drive.

Finally, loss of data is a real issue. It is unlikely that you will have a fire and lose your paper bank statements. It is also unlikely that your hard drive will crash and die. But both happen. If you are saving files on your computer, make sure to back up often to an encrypted external hard drive. You just never know.

What I Do

I use a combination of paper and electronic statements. My old bank accounts and credit union account statements come in paper. My new online accounts and my brokerage and credit card statements are all electronic. I have been meaning to switch from paper to electronic files for everything, but I am too lazy to scan in the old documents to have a full electronic library.

I fully support electronic files for everything, but be smart. Have backups, encryption, and unique, strong passwords for every financial site. Don’t get lazy and deal with the consequences later.

Either way, make sure you keep your statements long enough and do a little cleaning every year. Tax season is the best time to shred old files.