Is It Time to Declutter Your Finances?
Dear Carrie: I am trying to simplify my finances and have way too many accounts (savings, checking, brokerage, credit cards). What happens when you close an account? Is that bad to do? -- A Reader
Dear Reader: Decluttering is certainly a popular concept these days. So why not apply it to our finances? While we all start out thinking we'll keep things simple, as time goes on, it's not unusual to find ourselves with accounts we no longer need -- whether it's a checking or savings account that lured us in with initial higher interest rates or that credit card with irresistible perks. So you're wise to step back, review what you have and decide what's no longer useful.
However, while there's no real downside to closing a bank account, a credit card is another story. Here's what I'd suggest.
Review Your Checking and Savings Accounts
How many bank accounts do you need? There's no cut and dried recommendation. It really depends on your own situation.
-- If you're single, having one checking account should be sufficient, especially if it has low fees and earns interest. Add to that a high-interest savings account and you should be set to go. I'd also set up an automatic transfer between the two to make saving that much easier.
-- Couples may want to add an account or two to take what I call a "yours, mine and ours" approach. In this case, you might have a household checking and savings account for mutual expenses and goals and separate checking and saving accounts for personal use.
-- For a special goal, such as a big trip or a down payment on a home, it may make sense to have a savings account specifically for that purpose. Seeing the balance grow in that dedicated account can be a real motivator.
-- The FDIC insures up to $250,000 per depositor per bank. Therefore, if you have accounts with large balances, you might consider spreading your money across two or more banks. The FDIC's Electronic Deposit Insurance Estimator can help users get details about their specific situation.
Other than that, there's no reason to have multiple checking and savings accounts. So when you review your accounts, compare fees, interest rates and any other benefits and decide which ones work best for you. Then simply transfer your balances to the accounts you want to keep and close the accounts you no longer need.