Joint Bank Accounts: What They Are and How They Work

FT Contributor  | 

When you open a bank account, you are usually the sole owner of the funds associated with the account. Only you can withdraw money, use checks, or change the terms of the account. However, if you open a joint account with another person, both you and the other account holder have the same rights and access to the funds in this account.

A joint bank account is an easy way for a married couple to manage finances together. A joint savings account or checking account is also a popular way for a parent to monitor his or her child’s saving and spending habits and to contribute funds to the account. Some business partnership relationships may also require joint bank accounts to pay for business expenses. There are different types of joint accounts to choose from, depending on the reason for the shared account.

What Is a Joint Bank Account?

A joint bank account is different than simply adding a cardholder on an account. With a joint account, you and another account holder have the same rights to the funds. For example, if you’ve opened a joint checking account, both you and the other account holder are provided with debit cards and checks. Both of you can also review transactions on the account, including all purchases made.

Types of Joint Bank Accounts

The type of joint account you choose to open depends on your situation and the purpose of the account. In the U.S., there are two types of joint accounts.

  • Survivorship Accounts – These joint accounts are typically opened by couples, but can be utilized by any two people. Access to funds is divided evenly between both account owners and responsibilities are shared equally. Upon the death of one of the account owners, a survivorship account passes all account funds to the surviving owner.
  • Convenience Accounts – These joint bank accounts are commonly utilized by a person who is elderly or incapacitated so that an outside individual can act on his or her behalf. With a convenience account, the account assets are not passed on to the joint account holder after the owner passes away. Instead, these funds are considered part of the estate so they can be distributed by the responsible outside individual, as requested by the account owner.

Pro and Cons of a Joint Bank Account

As with any financial decision, it’s important to weigh the pros and cons of opening a joint account. The specific factors you must consider when deciding whether or not to open a joint checking account depending on your particular situation.

Pros of a Joint Account:

  • Monitoring: You may consider opening a joint bank account so you can monitor your child’s spending habits. If you’re still trying to teach him or her about money management, knowing the transactions performed on the account can help you to critique your child’s financial habits. A joint account also allows you to transfer money quickly if you provide a spending allowance to your child. 
  • Practicality: If you have a significant other or spouse, a joint checking account can simply be a matter of convenience. If you split household expenses, such as groceries, utilities, or rent, you can easily pay these bills using your joint account. This allows you to split these expenses down the middle without the hassle of transferring money or somehow paying each other back.
  • Introduction to Finance: If you, your child, or your significant other is new to the world of banking and finances, it can feel overwhelming and intimidating. A joint account can allow you or the other person to feel more comfortable as the owner of a bank account. With help from a co-owner to manage the account and monitor finances, it can be easier to learn how the account works and how to responsibly manage the funds.
  • Financial Insurance: Each bank or credit union joint account holder is insured by the FDIC for up to $250,000. This financial insurance can be essential for you and your co-owner’s peace of mind.

Cons of a Joint Account:

  • Control of Spending: A joint account allows both owners to spend and withdraw money, usually without limits. If your partner doesn’t have good control of his or her spending habits, you may find your account depleted, which can be frustrating and stressful on a relationship.
  • Debt Issues: If you, your joint account holder, or both of you, have unpaid debt, creditors can pursue funds in the joint account. It’s important to review both you and your partner’s financial situation before opening a joint account. Remember that the money in the account is vulnerable to these debt collectors if you or your partner are behind on payments.
  • Privacy: Since both you and the joint account holder have access to the account, there’s no privacy and all transactions can be reviewed by both of you. You should only open a joint account if you’re willing to allow the other person to observe your spending habits and vice versa.

How to Open a Joint Bank Account

Although joint accounts are different than personal accounts, the process for opening either type of account is similar. You can open a joint account in person at a local financial institution or credit union. In most cases, you can also complete the application process online. To open a joint checking account, you’ll need to:

  • Provide your personal information to your bank or credit union of choice, including your legal name, Social Security Number, and date of birth.
  • Request a “joint account” when asked.
  • Provide personal information for the other account owner when requested.

You’ll be provided with the account number and information on how to access the funds.

Transitioning Into Your Joint Bank Account

Joint accounts are convenient because they allow two people to share finances and access to the same account. However, if you’re used to having a personal account that only you have access to, a joint bank account can take some getting used to. It’s important to prepare yourself for the transition to a joint bank account.

  • Open the Best Account for Your Needs: Since there are different types of joint bank accounts, it’s important to do the research on these accounts. Review the purpose of your joint account and choose the type of account that will meet you and the joint account holder’s needs.
  • Communicate Clearly: You and the joint account holder must stay in clear communication so you know you’re on the same page with the account. Clearly stating your purpose for the funds and your plans for the account ensures it’s being used properly and that you both have the same intentions.  
  • Use the Account for Shared Costs: If your joint account is used for shared expenses, a budget can help ensure the money is being used properly by both of you. By making a budget for your shared expenses, you can both confirm the funds are being managed correctly.
  • Have One Person Carry Out Transactions: While both you and the joint account holder will have the same rights, it can be less complicated to elect one of you to make withdraws for shared expenses. By having one party in control of spending, you will both know when and how much money is being withdrawn at all times. However, both of you should stay active in depositing funds into the account.

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This post was updated November 7, 2019. It was originally published November 7, 2019.