What Are Joint Bank Accounts and How Do They Work?
If you’re about to get married or have already tied the knot, you may be thinking about opening a joint bank account with someone else. Joint bank accounts allow you to combine your finances into a single account — sharing the responsibility and benefits of pooling your money together.
While joint accounts are similar to individual bank accounts, there are a few distinctions to be aware of. Use this guide to help answer your questions about a shared bank account, so you can decide if opening one is the right move for you.
How Do Joint Bank Accounts Work?
When you open a joint bank account, both people on the account have equal rights to the money inside.
Both of you can deposit and withdraw funds at any time. You both get your own debit card and can use them anywhere your card is accepted. And you both can make payments from the account through online bill pay.
The bank doesn’t differentiate between funds you or your joint account holder deposit — so either person can access those funds at any time.
You really need to be able to trust the other person, because they have a legal right to take every penny out of the account. If they overdraw the account, both of you will be held liable for any fees incurred. Additionally, if they allow any debts to go unpaid, creditors can seek money in shared accounts for repayment.
Joint accounts offer double the protection, with each co-owner insured up to $250,000 by the Federal Deposit Insurance Corporation. This means the total insurance of your joint accounts within a single financial institution is $500,000. This can be helpful for couples with large cash balances such as receiving a deposit after selling a home.
Can You Have a Joint Bank Account if You’re Not Married?
Joint bank accounts are available to more than just spouses. You can open a joint account with a boyfriend, girlfriend or fiancé, as well as another family member or dependent.
For example, you might open a joint checking account with a minor child. Or, you could open a joint bank account with an aging parent, both to help manage their expenses and to have access to the account if they pass away, without having to consult a will or obtain a lawyer.
What Are The Pros and Cons of Joint Bank Accounts?
Joint bank accounts can help you streamline your finances after getting married, or help you manage the finances of an aging parent or growing child. But there are also drawbacks to consider before opening a joint account. Here are some pros and cons of joint bank accounts to consider:
Pros
Encourages trust and teamwork: Getting a joint bank account requires an immense amount of trust. If you’re married, this means you are allowing your spouse full access to the money you deposit into that account. And to build this trust, you will need to have some ground rules and a shared vision for the money in that account. You might consider putting together a budget and financial plan that you both commit to.
Helps simplify your finances: Combining your finances into a joint bank account can simplify the day-to-day of managing your money. This may include being able to streamline direct deposits into a single account, pay all bills from your joint account and combine savings into a joint account as well.
Double the insurance: When you open a joint bank account, you gain access to $500,000 in total FDIC insurance. As you combine your savings together, you can protect a larger single balance within your joint account vs. requiring two separate accounts for the same amount of insurance.
Earn more interest: If you open a joint savings account, you might be able to earn more interest as you combine your savings balances. Some top savings accounts or CD accounts pay more interest for larger balances, and a joint account may help you earn that higher rate.
Cons
Less autonomy: With a joint bank account, both account holders have full transparency into how funds are spent. This may mean less autonomy with the money you earn, as you may need to justify your spending to the other account holder.
More vulnerable to financial betrayal: There’s no other way to say it — opening a joint account may put your money at risk if your joint account holder is not trustworthy. They have full access to all the funds in the account, regardless of who deposited the money. This is why it’s imperative to fully trust anyone you open a joint bank account with.
Joint debt responsibility: When you open a joint bank account, the funds in that account are now subject to debt collections from either party. If the other account holder has a judgment against them, both account holders are responsible for that debt.
Which Bank Is Best for Joint Accounts?
The best bank for a joint account will not be the same for everyone. Factors such as whether you prefer to bank online or in person, minimum balance and deposit requirements, access to ATMs and interest rates can make a difference. These features might not hold equal weight for you and your joint account holder, so be sure to conduct your own research.
Here’s a look at five key features to consider when shopping around for a joint checking account:
APY: If you tend to carry a balance in your checking account, seeking out a bank that will pay you interest is a great way to earn free cash. Banks generally set their own interest rates on accounts so it’s wise to check a few banks to find the best rate.
Minimum balance requirements: Some banks require you to have a minimum amount of money to open an account, as well as a minimum account balance at all times. Failing to do this can result in fees, so it’s important to take this into consideration.
ATM access: Many financial institutions belong to a network like Allpoint, which offers complimentary access to ATMs across the world. While this is becoming increasingly common, there are financial institutions that only allow free transactions when using their ATMs.
Overdraft fees: It can be easy to inadvertently overdraft your checking account — especially when sharing it with someone else. Many financial institutions offer overdraft protection up to a certain amount, so you’re not hit with fees if you accidentally spend too much.
Online vs. traditional banks: You’ll need to determine if you and your co-account holder would prefer to do your banking entirely online or if you want the option to visit a physical branch location.
How To Open a Joint Bank Account
To open a joint bank account, you’ll need to apply online or in person at a bank or credit union. Most applications require submitting the following information from both account holders:
Full name
Address
Email address
Phone number
Social Security number or Tax ID number
You may also need to provide documentation for each account holder, including:
Government-issued photo ID such as driver’s license
Proof of address
Other documentation
You both may need to be present to apply in person. Otherwise, you’ll both need to submit and sign the bank account application online to be approved for a joint account.
Final Take
Opening a joint bank account with someone is a huge deal. While it will function largely as a solo account for usage purposes, you’re legally sharing both the money and responsibility with the other person, so make sure they’re someone you can fully trust.
The best strategy may be having both joint and separate bank accounts — allowing for a sharing of finances for household bills and shared expenses while having separate spending accounts for each spouse. This offers some autonomy on spending decisions while still promoting unity in handling bills and other household expenses.
FAQ
Here are the answers to some commonly asked questions about joint bank accounts.
What are the types of joint accounts?
There are many types of joint accounts. Here are a few:
Either or survivor
Anyone or survivor
Validity
Latter or survivor
Jointly
The different types of accounts set a precedence as to how the money will be handled should an account owner pass away.
How can you open a joint account?
To open a joint account, you can either visit your bank's website or visit a branch. Be prepared to provide basic information such as Social Security number, address, phone number and employment details for both account holders. If you are opening an account in person, you should plan on both account holders being present.
Can you get in trouble for using money on a joint account?
If you are a named account holder on a joint account, you have the right to use any and all funds within that account. And while you may not be in legal trouble for accessing those funds -- it might cause conflict in your relationship with the other joint account holder if you access funds without their knowledge. Plus, if you have automatic withdrawals or bills connected to your joint account, withdrawing funds without consulting the other account holder may result in overdrawing the account.
Should I open a joint bank account with my wife?
The choice to open a bank account with your spouse is a personal one, though in most cases it's usually a good idea to have a joint account with the person you marry. This can encourage trust and transparency in your relationship surrounding money and financial goals. In some cases, having combined accounts as well as separate accounts can help provide peace of mind for your spouse -- especially if this is a second marriage or if both of you are coming into the relationship with significant assets or debts.
Jennifer Taylor contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: What Are Joint Bank Accounts and How Do They Work?
