Consolidating Accounts

Posted by: Sophie H. | Jan 19,2008


On this site, you can find a lot of information about debt consolidation.  This involves combining a bunch of loans into one debt, usually by paying off all the outstanding loans at once and then paying off the one large loan.  This can be done via home equity or through a personal bank loan.  I’d say the latter is good even if you’re not saving a huge amount of interest.  If you’ve got five outstanding debts, you’re more at risk to default than one outstanding debt, so a consolidation loan can pay out in more ways than interest.  

There are other ways to consolidate too.  For example, it’s a good idea to do all of your business at one bank – including checking, savings, and credit card.  This makes it much easier to transfer balances between accounts.  Suppose you want to automatically deposit money from checking to savings, or you want to deposit rewards point dollars into a checking account.  Sticking with one banking institution can streamline your transfers.  

Consolidating retirement accounts is also a good idea.  If possible (all employers don’t offer it) rollover an old 40(k) account to the account set up by your new employer.  You won’t lose the money if you do this, but it’s always recommended to combine accounts.  Rolling over a 401(k) account into an IRA is bit trickier, so make sure that you don’t get overly taxed in the process.  To avoid this, do a direct rollover, a fairly complicated but necessary process.

Try also to cut down on the number of credit cards you have in your wallet.  However, don’t start canceling cards left and right.  Keep the card that you’ve had the longest that also has the best interest rates.  Just transferring a balance to a new card and canceling the old one can hurt your credit rating, so this type of credit card consolidation is not entirely recommended.    

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