As a kid, the only thing you had to worry about was whether your piggy bank was full or empty. Then you grew up, started signing up for bank accounts, credit cards, and loans, and all of a sudden life started looking a lot more complicated.
If you have so many accounts you’re perpetually drowning in a sea of monthly statements, you might just be losing money, even if you signed up for all those accounts to save yourself money in the first place. Bills that should be paid get forgotten, you get charged annual fees for useless credit cards that haven’t seen the light of day in years, and money rots in bank accounts that exist for no good reason.
If that sounds like you, here are four reasons it’s time to sit down and simplify your accounts.
Get more mileage out of your credit cards
Signing up for credit cards and then forgetting about them is a bad idea, but it happens. Over the years, the benefits of a credit card tend to evolve, and the card can end up becoming quite different from what it was before. That also means that some cards fall by the wayside and stop getting used as much as before.
It’s not a good idea to hold on to credit cards you no longer use, as you risk being sneakily charged annual fees. Every once in a while, you also need to examine your existing cards and work out the best strategy to accrue rewards and hit the minimum spend, or you risk scattering your spending inefficiently over several cards. Cancel the useless credit cards and then consolidate your spending on those that actually benefit you.
Of course all this is a moot point if you don’t actually have the credit card best suited to your lifestyle. Doing a little homework on which is the best credit card for you will go a long way to helping you get better rewarded for your spending.
Fewer credit card bills to pay
Sure, we all love credit cards for the benefits they entitle us to. But one thing’s for sure—sorting out all those credit card bills at the end of the month is a pain in the neck. Miss a couple of bills and you could find yourself forgetting to ask for annual fee waivers and getting penalised for paying late.
By getting rid of all your useless credit cards, you’ll be reducing the number of bills that get sent to your home and, more importantly, the confusion you experience. To make life even easier, apply to pay all your bills by interbank GIRO so you’ll never get fined for late payment again.
Consolidate your cash into the most useful account
Other than the fact that you get to feel smug for two minutes while withdrawing cash at the UOB ATM when the queue for the POSB ATM is too long, it’s not very efficient to maintain a multitude of bank accounts
When you’ve worked out which bank account earns the most interest, it makes sense to put as much of your money into that account as possible in order to maximise your interest earnings. It’s a question of simple math. Check out this article elsewhere on MoneySmart if you still don’t know which bank account you should be using. We’re going to be looking further into this so follow us on Facebook to stay tuned!
And as for those accounts that have been paying you $0.15 in interest each year for your life savings, close them without a second thought.
Save precious time when planning your finances
You might be loath to spend a couple of hours sorting out and simplifying your accounts. But spending one afternoon getting things in order can save you lots of time later on. Would you rather cancel a couple of credit cards now or deal with an extra 30 credit card bills a year? Would you prefer to close a few unused bank accounts or continue to be clueless about how much liquid cash you really have? The choice is yours.
You might not immediately enjoy the time savings of getting your accounts in order. But when you finally decide it’s time to make or review plans for your financial future, having fewer accounts to deal with can make all the difference between being able to assess your financial situation at a glance and spending weeks trying to decipher mountains of confusing statements.
How often do you review and simplify your accounts? Tell us in the comments!
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