Paperless vs. Paper Statements

scansnap

Pictured above is the Fujitsu ScanSnap iX500 Scanner. It can digitize a page every 2 seconds, and some version of it has been on my Amazon Wishlist for many years. However, I still haven’t plunked down 400 bucks for it, because I don’t know if I’ll ever go completely paperless.

There are many tutorials on how to scan all your paper documents into Dropbox or Evernote. Liz Weston recently had a Reuters article about going paperless with tax-related documents:

I don’t make New Year’s resolutions. Instead, I resolve every tax season to get a better handle on my paperwork — with mixed results. This year, I turned to three certified public accountants to find out what apps, software and strategies they use to keep track of everything.

Kelley Long, a Chicago CPA and personal financial specialist, tries to generate as little paperwork as possible, opting for electronic records instead. “The IRS accepts electronic records,” said Long, resident financial adviser with Financial Finesse in Chicago. “There’s no need to keep paper. That’s the one thing they’re modern about.”

Long keeps a folder on her computer desktop for the current year’s tax documents. If a document comes to her in paper form, she scans it, saves it in the folder and shreds the original. She converts emails documenting charitable contributions and other tax-related expenses into PDF files by choosing the “print” function and then “save as PDF.” […] At the end of the year, she downloads her bank and credit card statements into the folder.

But then Reader Bill sent over this Clark Howard article about the benefits of paper statements:

If you think about all the companies you do business with, they all try to get you to turn off paper statements. If you’ve done so, I want you to turn that around and go back to getting statements in the mail.

With a paper statement in hand, it’s easier to prove that you had the money in the first place in the event funds go missing. If you are set up for electronic info only, well, that’s going to hurt. So the best precaution I can give is for you to go back to getting the paper.

So, which is safer? In my opinion, for most things they are equivalent. Paper statements can be lost, stolen, or destroyed (i.e. house fire). Electronic statements can be lost, hacked, or destroyed (i.e. hard drive crash). You can protect yourself with redundant copies of either one (i.e. safe deposit box, extra USB drive, cloud backup). Keeping a nice long history of either paper or paperless statement can help you prove ownership or status of assets. Indeed, the IRS accepts electronic copies as equivalent to paper, so why shouldn’t we?

(I would agree with the implication that those repeated calls for you to “go paperless” are less about eco-friendliness and more about saving printing and mailing costs. I am also curious to know if credit card companies have found that paperless statements lead to more missed payments and thus more interest and late fees. It certainly is less wasteful, though.)

The safest thing would be to keep both. In the event of some Fight Club-esque event where the digital records of your assets are lost, paper statements might help. In the event of some local disaster where my home and my bank is destroyed, then digital records in the cloud would be helpful. (It may be a good idea to read up on file encryption.)

What do I do? I maintain regular paper statements for my most important financial accounts. That’s basically my primary IRA, 401(k), brokerage, checking, and savings accounts. The main reason for the statements is that I am in charge of family finances, and if I am injured or worse, then my spouse will be able to track everything simply by opening up the mail (plus other estate documents). I also keep paper copies of our monthly bills coming in for the same reason. I still enjoy my ritual of sitting down with physical bills and paying my bills (online) once a month as I use the opportunity to review our monthly spending. Important statements are sent to a P.O. Box instead of my house to reduce chance of theft and protect privacy.

I also have several other financial accounts that are either dormant, temporarily opened for reviews or experiments, or have low balances. Those are all set to paperless and tracked online by Mint.com. I’d rather give Mint my passwords and keep a virtual eye on all of them, rather than the likely alternative of never checking in on them at all.

Comments

  1. Daveraham says:

    Go electronic. I understand the concern raised by Clark Howard. But he is thinking about keeping the data on the companies server. From that point of view I agree, don’t “trust” companies because most of the records are always built dynamically.

    BUT if you have an electronic version offline, you should be fine. I like the services FileThis.com

    It’s setup similar to MInt, where it stores account information, but instead of fetching dollar amounts and transactions, it grabs every statement available and stores them where you direct. Personally I store it an evernote account and then periodically pull it off to store on a removable HD that get’s stored in a fireproof box. Overkill?? Sure…. But its the point. You want to keep that snapshot of data for a long period of time.

  2. My wife and I try to digitize as much of our life as possible. All online banking, credit cards, paperless billing, paperless financial statements. We travel so much we often go weeks or months without checking the mail. It’s 2015: why should I ever need to physically mail or, worse, fax something? We back everything up in Google Drive. I figure if Google ever loses it then we probably have bigger world problems happening (aka, the Apocalypse).

    It’s depressing that most places still issue you a physical receipt. I really like shops that use Square because I can text or email myself the receipt. I never really do though. All the important or expensive purchases are on credit or debit cards, so no need for a receipt unless I want to itemize. The less paper I have to worry about the better. Plus you can’t digitally search paper, like you can with electronic files.

    • For paper receipts, I use the onereceipt app on my phone… I take a picture and it is OCR’d and stored in the cloud. I have every single receipt for a couple of years now.

      For statements, the mint bills app (used to be called check and page once before that) has a nice feature called file cabinet… all statements are automatically archived there.

  3. Aaron B says:

    I really don’t understand the caution from Clark Howard that “If you are set up for electronic info only, well, that’s going to hurt.” In the original article, that comes shortly after this proclamation: “Paper statements help prove your balance in event of catastrophic attack” (such as hackers stealing money from the bank). If I’ve never downloaded electronic copies of my statements, yeah, maybe I’m going to face some challenges, but then I’ve been pretty negligent. That’s not too much different from me taking my paper statement and immediately junking it. Just download the statement each month when the bank (or whatever kind of company) emails you that it’s available. Done. No need to return to 1995.

  4. Both paper and paperless have their advantages and disadvantages – but I’d lean towards paperless just because that just seems to be the direction we’re heading technology-wise. There will always be an issue of theft whether you have paper to be stolen or statements that could be hacked, so being afraid of one or the other is rather silly. Thanks for sharing your thoughts on this.

  5. I really fail to see the merits in the Clark Howard article – it seems to be contrarian click bait. He says that if you lose funds, the digital records won’t show those funds but your paper ones will. My understanding is digital records (monthly statements, transaction history) are the exact same as the paper ones, so I don’t see how that scenario is possible.

    As for the Fight Club dystopian scenario – is it more plausible that the entire financial system has its information wiped out (and not able to be recovered) – or that you will misplace paperwork, or have a flood/fire/theft/accident that affects where you store documents?

    And again, if the financial system is facing that level of catastrophe, will your paper records really be relevant in the unprecedented breakdown of our economy?

    I also agree with Spencer about digital receipts – I’d love to see more restaurants using apps like Dine & Dash where you can pay your bills on your phone.

    • James N says:

      I was scrolling down to say almost exactly the same thing. In particular that if something happens that causes all digital records to be destroyed, proving that you USED TO have money in what used to be a bank in what used to be civilization will be the least of your concerns.

      If you’re worried about that sort of a disaster, it would be wisest to stock up on food and water and ammunition, and plan for a quick retreat out of the city.

    • Bad Luck says:

      I have had one bad encounter with dynamically generated statements where a printout made things much easier to rectify.

      My wife’s student loans were in deferral when she was in grad school. For an unknown reason, when updating her status they removed the old deferral from her record. The billing system dynamically regenerated all statements as being past due! There was no evidence on the online statements at all that the previous bills were actually deferred.

      In this case, the paper statement made it much easier to prove the billing system screwed up.

  6. I have been trying to go all paperless for several years, but it seems like I’m still being swallowed by piles of paper. All of my financials are paperless and I do try and download them all regularly. I back everything up online and an external hard drive since computers have failed me before. I tried scanning in receipts to pdf and naming them, but it got extremely tedious after a few business trips and managing rentals. I have not found scanning even with ocr to be useful. I am currently taking a photo with my phone of all receipts and putting them in a file by month so they are not really sorted. I have tried apps to gather receipts for a business trip, but I normally still end up entering all the info on excel. I don’t want to spend hours of my life renaming every file and it is really not necessary. I have been pleasantly surprised that even local retail places have used the photos to return items. I did run my drafting business for two years with every single note scanned and no paper saved after the projects were out of my hands, otherwise I would’ve needed a house addition for all the documents. I have asked friends, but no one else seems to have a better system than filing and scanning or photographing for managing all of the digital files. Any other ideas?

    • Fern Lin-Healy says:

      There is a service called Shoeboxed where they give you a monthly prepaid envelope to mail all your receipts and documents, and they scan them and upload them to your online account and also mail the receipts back. I think there’s an option for them to extract the numbers and put it into a csv file that you can download. You can also upload your own images. There’s a monthly subscription for the mail-in service. If anyone has tried it I’d love to hear your thoughts.

  7. I never thought of the point Jonathon made about keeping your spouse in the loop with mail statements in the event of your demise, this is relevant to many couples with one spouse handling the finances. Without a password the other spouse could not even access the statements even if they knew what existed. I am keeping my paper, not to mention whenever I apply for a loan they want the last 2 months of statements. copied on paper.

  8. Most banks here charge for paper statements, I think its a $1.50 a month and for my bills I didn’t elect paperless, the company stopped sending the statement through the mail. At first I wanted statements but now I love having no papers around. Less stuff to go through at the end of the year.

  9. DH does the taxes using H&R Block online. We no longer print out all the paperwork that results, but we do keep a folder with the income tax documents we were sent from banks, investment companies, charities, etc. I have become strict, however, at recycling all documents as soon as they are seven yrs old.

  10. Tony @ Inequality Today says:

    I usually use paper statements as well. The extra fee ($1 a month for my bank) isn’t that significant, and in the case of any future discrepancies at least I have a hard copy. However, I always keep an electronic copy along with my paper one.

  11. Andreas Reiter says:

    I completely agree with Spencer, especially with his statement ‘I figure if Google ever loses it then we probably have bigger world problems happening (aka, the Apocalypse)’ With that said, you can always download statements once a year to an external drive/NAS at home and then backup those files using a program like Crash Plan (have several layers of protection) Our lives are cluttered enough.

  12. Check out the Brother ADS-2000 instead of the Fujitsu. For home use, its pretty much equivalent (very fast and 2-sided scanning). Major difference is it does not come with a full acrobat license.

    • Fern Lin-Healy says:

      I agree with the Brother ADS-2000 if you don’t mind having something taking up space on your desk. It’s about the size of a small laser printer. If you want something that you can stash away when not using it, I recommend the Fujitsu Scansnap s1300. It’s slower than the Brother ADS-2000, but it’s very small–about half the size of a shoebox. You can fold it up and put it away whenever you’re not using it. that It’s been a workhorse for me. Brother has one about the same size as the s1300, slightly bigger. My experience with that one wasn’t positive. The lack of quality consistency between models is something I’ve noticed with Brother printers too.

      Seriously, even if you don’t want to go all paperless, get one of these scanners. I can’t recommend them highly enough.

      I used to like having paper statements too, but they are a real pain if you move often, so I started getting electronic statements. I scanned the old paper statements which wasn’t so time consuming. What was time consuming was all the shredding afterward! You don’t realize how much paper you’ve accumulated until you have to pay by pound for them to be shredded!

  13. I’ll quit getting paper statements when companies stop charging fees for late payments. Paper bills help me keep track of what to pay. It’s too easy to miss important emails with all the spam you receive, especially from the companies sending emails about bills. Of course, if they charged me for statements I would go paperless. I refuse to pay stupid fees.

  14. I bought a $300 scanner in 2010 and used it quite a bit to digitize my life. Now there are free apps out there that are as good (or good enough) as a $400 scanner. The best is by Evernote called “Scannable.” It’s faster than using a physical scanner too.

  15. Great discussion. I personally prefer paperless. Even though I meticulously file things, the time required to retrieve those documents is crazy compared to a quick search on Evernote.

  16. I like how the Clark Howard article gives no credible or reliable information as to why you should keep hard copies. I get that the electronic age comes with its own set of issues, but nothing he said cannot be totally refuted. If you are telling someone to do more work and spend more time doing something tedious, you should at least explain why it is worthwhile.
    The paper copies you receive are the same as the electronic copies.
    The credit card/banks are or are not going to be hacked, and you cannot stop that with hard copies.
    Simply save the monthly digital copies to a hard drive or cloud server (or print them yourself if you love wasting resources).

  17. I am glad I am doing exactly what Jonathan is doing! I managed my family bills and finance. I keep paper bills so my husband can see them if I can’t…

  18. I don’t understand the controversy. ALL my statements are AVAILABLE electronically, most companies allow the OPTION to get them as paper, although some may now charge a fee. These statements are PDF’s, identical in all ways to paper versions. I simply download them all each time I run Quicken. Store them on your computer, burn them to a CD / DVD, store the disks in a file cabinet or offsite, and/or print out the important ones. Multiple layers of redundancy. For non-essential accounts like phone bills and utilities it’s nice not to have to remember to open the bill to look for bad charges or excesses,

    As to “proof” issues, the courts have established new ground rules that “copies” are now acceptable as evidence and it is up to the other party to prove with countered evidence that the “copies” have been altered. Phone photos, texts and emails are all allowed as direct unequivocal evidence now so there should be no more issues in that regard.

    Regarding PAYING the bills, almost all the companies have an eBill feature that my bank website automatically pulls in when the bill is due. For those that don’t (are you listening Chase and CapitalOne?) I set a reminder through my bank or the credit card website allow email notices in advance of the bill being due. Eezy peezy.

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