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Consolidate Your Financial Accounts

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Long time readers of Bargaineering will know that in the last year I’ve been aggressively consolidating our financial accounts in a quest to simplify my finances. It seems fitting that, for Spring Cleaning Week, our second post of the series should be one about how to consolidate all the financial accounts you’ve accumulated in the last few years.

In an ideal world, you really need one checking account, one savings account, one credit card (debatable), and one brokerage account. We, of course, don’t live in a utopia, we live here. :) It doesn’t take long for financial accounts to accumulate like knickknacks on your bookcase or mantle. A change in job adds a 401(k), a change of address adds a new bank, and before long you have a dozen financial accounts you don’t even use every month with a few bucks here and a few bucks there.

While most of the battle is in just consolidating, I think that a few tips I picked up may help you in your quest.

This post is part of the 2011 Spring Cleaning Week!


Draw a Financial Network Map

Draw a financial network map that illustrates the relationships of all of your accounts. This will give you a better idea of which accounts you can trim and which ones you can keep. Of my original map, I trimmed Emigrant, FNBO, and ETrade (and several others I didn’t include) from the network without any incident. A map is absolutely crucial.

Consolidate Credit Cards

When consolidating credit cards, try to consolidate one card into another. For example, if you have two Citi credit cards, call them up and ask if you can consolidate one into the other, merging the credit lines. When you close a credit card, you might take a small hit as your total outstanding credit falls (this impacts credit utilization) and your average age falls. By merging cards, you minimize the damage while maximizing simplification.

If you’re also combating credit card debt, one great way to consolidate your cards and reduce your monthly interest payments is to take advantage of a 0% balance transfer. By consolidating several debts into one, you can reduce how many accounts you have to manage and lower the interest rate (for at least 12 months). This gives you a chance to catch up and keeps things nice and clean.

Rollover 401(k)

When you leave a job, consider rolling over the 401(k) into a Rollover IRA unless your fund options are stellar. Each of my employers had good 401(k) programs but their expenses couldn’t compete with Vanguard. Vanguard charges a mere 0.07% on their 500 Index Fund (Admiral shares) and no annual account maintenance fee.

When you do decide to start consolidating, you don’t need to do it all at once. Start with the easy ones first to get a little wind in your sails. Online savings accounts can usually be closed entirely online and credit cards usually only need a phone call. Brick and mortar bank accounts usually require a visit, so you can save those for when it’s convenient.

{ 24 comments, please add your thoughts now! }

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24 Responses to “Consolidate Your Financial Accounts”

  1. Nick says:

    I would say the easiest and most effective way to do this is by finding financial advisor whom you trust. Most people have a full time job, family, or countless other distractions that handicaps their ability to properly manage their money. That’s why it’s absolutely worth every penny to have someone professionally manage your accounts. Not only do you have a direct contact in a brokerage office, this person understands you, your family, and your future goals. They make sure you’re engaging in tax-efficient investing, properly allocated, aware of new opporunities as they come, assist with market timing, and have access to different classes of shares. I found working with Merrill Lynch to be the most comprehensive experience; but there are many others with solid financial advisors, just not quite the same amount of access to different resources. Especially with the addition of Bank of America.

  2. DIY Investor says:

    I agree 100%. Many times potential clients have 14 statements from 5 different brokers and have reached the point where it is a major project to figure their basic asset allocation and/or investment performance. You can’t manage what you can’t control.
    Great tip!

  3. Aaron says:

    “In an ideal world, you really need one checking account, one savings account, one credit card (debatable), and one brokerage account. We, of course, don’t live in a utopia, we live here. :)

    I had only one credit card for a number of years, and then found that I didn’t have a credit score, because I didn’t have enough open lines of credit. I don’t recall what the basic formula is, but you have to have X number of recent items, and a single credit card won’t cut it, if you’re borrowing money from somewhere else at the same time. So if you’re not making payments on a house or a car (I was renting, and my car long paid off), you might want to have that second piece of plastic.

  4. Bey says:

    Good thoughts, but you can simplify and consolidate too much. And mulitple accounts can be a bit safer. I have a rewards checking account with a large balance, which is used only at my local grocery store, and only to the extent that I meet the debit requirements. I am always in control of the debit card, and the card readers at the cashiers’ stations are unlikely to have been tampered with (unlike exterior ATMs). My reward checking is supplemented with a free Credit Union checking account, in which I keep a small balance that is tied to PayPal. I can also use this CU account to write small checks for things like carry-out pizza, and I get a box of checks free every year.

  5. Bey says:

    As far as consolidating your credit cards, you don’t want to go too far with that. I feel that the more rewards cards you have, the better. Multiple reward credit card accounts are desirable in case one gets maxed out, compromised, or just plain shut off by the bank — and each will likely offer different bonus rewards at different times. If you’re going to take advantage of 0% offers, look for the lowest transfer fee. 0% transfer fees still pop up now and then, but you’re more likely to pay 5% of the balance. This will be better than the 17.99% you had been paying on a retail store’s card, but don’t forget the reason for the transfer – pay it off! You don’t have to cancel the card you transferred from, in fact your credit score will be better for it, just remember *not* to use it. Once you’ve paid off your balances, you’ve got to do that each month – you can make hundreds of dollars a year from reward credit cards, but not if you’re giving hundreds back in interest.

  6. Bey says:

    Rolling a former employer’s 401k account into an IRA makes sense because then you can continue to contribute to it. But don’t ignore the option of rolling these funds into a current employer’s 401k if it’s allowed. You may have access to institutional funds that aren’t available for individuals. For that same reason, you may want to roll your 401k funds into an IRA with the same broker, for example Vanguard will allow you to keep and continue to contribute to institutional funds that you held in your 401k. And while index funds do have lower fees, don’t dismiss managed funds with higher fees – some of them offer performance that more than makes up for the slightly higher fees. Do your homework in these areas, these are for many people your largest investment in stocks & bands.

  7. zapeta says:

    I forgot about drawing a financial network map. There are several accounts that I need to close and drawing a map will simplify this for me!

  8. Great tips Jim. I think consolidating your accounts makes it easier for you to remember what money is where, and what needs to be paid.

  9. eric says:

    I’ve been good with this simply because I’ve tried not to open too many accounts. I still have one or two I’m thinking about consolidating but usually they have one or two features I like and I end up hanging on to them.

  10. I actually drew the map back when you wrote that post. I can easily keep track of the accounts in my head, but when I put it down on paper, it surprised me to see how many I really have. I’ve started working on consolidating, but it’s not an easy task.

  11. Alex says:

    FYI: I recently called Citi bank and they didn’t allow me to consolidate two of their credit cards. They said it is their new policy now. May be it is just me.

    • Jim says:

      They have to be the same “type,” so you can’t consolidate a business with a regular card… which two cards were you trying to consolidate?

  12. Alex says:

    they were two regular cards. First is the one that in old good times used to have 5% cash back and the other is some newer one I opened at the beginning of 2010. Nothing special. They are actually both “rewards cards”. I can’t think of any differences between them. This whole thing happened at the end of 2010. May be the second one was “too new” for consolidating? Or CSR was inadequate? I didn’t try again.

    • Jim says:

      Hmmm it would be a change in policy? Or maybe the different reward structures confused the CSR…

      • BrianC says:

        Its probably a change in policy. I haven’t tried Citi recently, but I know Chase no longer allows consolidation. The only success I’ve had in the past year or so has been with Amex.

      • Alex says:

        Jim, may be it has something to do with new bank policies coming to life, like Discover does not allow anymore a possession of more than one of their credit cards. They are not going to close them themselves if you have more than one, but if you have one now you cannot open another one anymore.

        • Jim says:

          You’re probably right. A year ago a lot of them changed policies because of the credit crisis and reacting to the new banking laws… just stinks that this one clean way of consolidation might be gone. :(

          You should try again and see if they still won’t let you, maybe they’re calming down? I would try myself but I don’t have any accounts to consolidate.

    • Shirley says:

      This morning, after reading this post, I called Chase (24/7 CSR) and asked to have the Slate card (not used in four years) merged with the Freedom card, adding the credit limit also. CSR said it was not possible because they were different types of cards.

      However, he was able to close the Slate card and add $4,000 to the Freedom card which resulted in what I was after in the first place… one Chase card (with rewards) and a higher credit limit.

      • zapeta says:

        Thanks for posting your experience. I have both Slate and Freedom, and rarely use either, except for whatever categories are earning 5% from the Freedom card. I may call Chase and ask them to do the same for me because I don’t want to lose the open credit from the old Slate card but I probably won’t use it at this point.

      • BrianC says:

        Good data point. I’ll see if that works for me when I go to close my Continental card later this year.

  13. govenar says:

    I prefer to have multiple credit cards, to use in different categories to maximize rewards. And as someone else mentioned, if you only have one or two credit cards your credit score will probably be lower.
    Also, you could try a site like mint.com to keep track of multiple accounts.

  14. Great idea for a post. I have been trying to clear out a lot of my old account recently as well.

    Regarding closing brick and mortar bank accounts, you probably don’t need to go into a branch. Some time ago I found a simple template that you can mail in to the bank to request your accounts to be closed. It simply has your name (and any joint account holders), account number, the type of account, your address, where you want the money sent, and your dated signature. Send it in to the address shown on your statement and that should be it. I’ve done this on multiple accounts from large and small banks and have never had any issue and usually get a check for the account balance in about a week.

    Here’s the template I use (from Principal Bank), but there are others out there if you Google “bank account closure form”.

    http://www.principal.com/bank/switchkit/conv_closing.pdf


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