How to Survive a Recession

LESSON 16: Consolidate Accounts

One of the easiest actions to maximize your financial success during a recession is to reduce the number of accounts held in your name. This includes bank, credit card, loan, and brokerage accounts. By closing redundant accounts and shifting money to a few accounts with the best terms, you reduce fees and complexity, and typically gain beneficial treatment for keeping a higher balance with a smaller number of institutions.

The benefits of consolidating accounts apply to both individuals and businesses.

Individuals: the best way is consolidate all consumer loans such as credit cards, car loans, personal loans, and (possibly) student loans into a single home equity loan. This makes the interest paid tax deductible (in the U.S. at least), and allows you to deal with a single lender who cannot easily take advantage of you due to the increased legal protections that comes with home ownership.

Businesses: the best way to consolidate accounts is to roll over into a single loan secured by fixed assets such as land, buildings, or equipment. Preferably, these fixed assets would not be necessary for day-to-day operations, and the business would survive if it defaulted on the loan. This approach enables the business to take a tax deduction the interest payments, reduces account fees and accounting complexities, and lowers the cost of borrowing by turning unsecured loans into a secured one.