Simplify Your Financial System

Phil Villarreal’s article earlier this week highlighted some of the new bank fees we’re likely to see now that new legislation has taken full effect. If you’re affected by any of these new fees, it’s about time that you take a look at simplifying and optimizing your banking system.

Banks are instituting these new fees because of their sacred cash cows, the overdraft fee, has been taken to the slaughterhouse. In response, they’re trying to turn a profit on the accounts that, without this fee, would be unprofitable. That’s why they’re introducing annual fees, low activity fees, and other fees that affect their least active customers. If you have a bunch of these low activity accounts and anticipate new fees, now’s a good time to simplify your financial network.

The first step is to draw your financial network map. It’s a map that illustrates all of your financial accounts, like checking accounts, credit cards, and brokerage accounts; and how they are interconnected. This is a crucial step in understanding what you can consolidate and what you can cancel.

Next, list any new fees on those accounts, marking them in red. You want to look for maintenance fees, low activity fees, and any other fees you’re likely to be assessed. Be honest, if you get dinged a late payment fee once a year, put that down too. This will give you an idea of which accounts you should consider trimming first.

Start paring off accounts you no longer need. For years I kept a checking account in Pittsburgh, I went to college. When they raised the minimum balance required to avoid a monthly maintenance fee, I withdrew the remainder of my balance. I hadn’t closed it earlier because I was lazy, the new fee gave me the incentive to start cleaning it up.

In general, you should stick with a minimum of one checking account, with convenient ATM access, and one savings account. I have a special place in my heart for high yield savings accounts, which generally have low minimums and no fees, but that isn’t required. If you like credit cards, try to stick with fewer than two or three (though you can keep them open if there are no associated fees), otherwise you will be OK with only a debit card.

Jim writes about personal finance at