How long a person should keep credit card statements depends on what the items they charged on their credit cards were used for. The amount of time that financial records should be kept varies, depending on whether the purchases are for personal use, included as deductions on an income tax return or if the individual is operating a business. Here are guidelines regarding these categories.
Credit Card Items for Personal Use
If you are not going to be listing the items you buy with a credit card on your income tax return, then you will still want to keep your credit card statement until the one for the next month comes in. When you receive it, check it carefully to ensure that the items appearing on your statement correspond to your records.
Pay your bill and hang onto the statement until you receive the next one confirming that your payment was received and credited to your account. Then you can go ahead and dispose of the previous month’s statement. The total amount of time it is kept in your home is approximately 45 days.
Income Tax Deductions and Credit Card Statements
In a situation where you will be using items bought with your credit card as deductions at income tax time, you will need to hang onto your statements longer than in the example above. Once your file your income tax return, the Internal Revenue Service (IRS) has three years to start an audit. You will need to keep all of your financial records for at least that amount of time after you file.
If the IRS suspects that you have not reported all of your income by 25% or more, the agency can audit you for any of the previous tax years. In cases of fraud, there is no statute of limitations, which means the IRS can go back indefinitely. You will need to respond to the questions the IRS has for you by producing documentation to support the numbers on your income tax return. Keep in mind that the IRS is not allowed to go on a general fishing expedition for information. While you need to keep the credit card statements for your records, you should only produce them if they are relevant to the items that are being questioned and on the advice of a tax professional retained to protect your interests.
You have options instead of keeping paper copies of your credit card statements. Many banks can provide you with electronic credit card records. It’s a good idea to ask how long the records will be available online, since some institutions automatically remove them from the institution’s web site at certain intervals. Rather than expect that the financial institution will have records indefinitely, a better choice is to download your credit card statements to your own computer. From there, you can transfer them onto a CD, where they will be available to you as needed.
How to Dispose of Credit Card Statements
When you are ready to get rid of your credit card statements, it’s not a good idea to throw them out in the trash. With all the concern about identity theft recently, you need to take steps to preserve your privacy when disposing of your personal records. Buying a shredder is a good option for the average consumer. These units are available from many office supply stores and other retailers. When you are looking for a shredder for personal use, consider a cross-cut shredder as opposed to a strip-cut shredder. The cross-cut type offers more security.
It may not seem feasible that a person would go through a bunch of shredded documents to try to put them together. But an individual who is determined to steal someone’s identity and credit card information might do exactly that. If you are going to invest in a shredder, it pays to make sure that the model you choose gives you the best level of protection possible.
Business owners who have numerous records, including credit card statements, can hire a document destruction company to look after this important function. It’s a good idea to ask questions about the company’s security measures before turning any type of sensitive records over to a third party, though.
No matter how long you need to keep your credit card statements, you need to have a plan for disposing of them in a secure manner. If you are in the market for a new or additional credit card, click on the free credit card “Chaser” tool to learn about your options. Get started finding and compare the top credit cards today!