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What Is a Joint Bank Account?
A joint bank account is an account opened by two or more individuals, allowing each account holder to deposit, withdraw and manage the money within the account.
Couples often use joint bank accounts, while family members or business partners may set them up, as well. This kind of account is particularly useful for managing shared expenses or savings goals, such as household bills, vacations or emergency funds.
Each joint bank account holder has equal access and rights to deposited money. This means that all account holders can make withdrawals or deposits without needing permission from the others. Likewise, action taken by one person affects the entire account.
How Do Joint Bank Accounts Work?
Joint bank accounts work similarly to regular checking accounts, but they have two or more account holders instead of one. Depending on the financial institution and their set of offerings, checking accounts and savings accounts can be opened as joint accounts.
Additionally, any of the account holders can use the funds in a joint account, regardless of who deposits the money. This is why it’s so important that all account holders maintain a trusting relationship and clear communication.
Debit Cards and Checks
Joint checking accounts come with debit cards and checks just like any individual account, except that each person gets their own debit card. Each account owner’s name is also listed on the checks.
Account owners can decide whether they want to use either the text “and” or “or” between their names on checks. This choice is important because each word has a different meaning when it comes to checks.
- Using “and”: The word “and” indicates that both account holders must sign a check.
- Using “or”: The word “or” indicates that just one account holder needs to sign a check.
How To Open a Joint Bank Account
Opening a joint bank account is a straightforward process that you can complete either online or in person at a bank or credit union.
Before starting the application process, it’s important to understand the specific requirements and features of the joint account you’re considering. Each financial institution has its own set of rules and benefits, so comparing a few can help you find the best fit for your financial needs.
To open a joint bank account, follow these steps:
- Research banks or credit unions that offer joint accounts and compare the following options:
- Fees
- Interest rates
- Mobile banking options
- Once you’ve decided on where to open your joint account, gather the following documents for both account holders:
- Government-issued IDs
- Social Security numbers
- Dates of birth
- Proof of addresses
- Initial deposit, if required
- Decide whether to apply online or visit a branch together.
- If you’re applying online, fill out the application form on the bank’s website.
- If you’re visiting in person, go to the branch with the other account holder(s).
- Complete the application process by providing all requested information for both parties.
- Review and sign the account agreement documents, acknowledging the terms and conditions of the account.
- If required by the bank, make the initial deposit to activate the account.
All joint account holders should be present during the application process. Having each party present ensures that all information is accurate and that all account owners understand the rights and responsibilities that come with joint accounts.
Pros and Cons of Opening a Joint Bank Account
When considering opening a joint bank account, it’s essential to weigh the advantages and disadvantages that come with shared financial management.
Pros
Simplified management: A joint bank account makes managing shared expenses more convenient by pooling funds for bills, groceries and rent, for example. You can also monitor progress toward shared financial goals.
Equal access: Each account holder has equal access to the funds in the account, reducing the need for multiple parties to sign off on day-to-day transactions.
Increased protection: A joint account increases FDIC insurance coverage as each holder is insured up to $250,000, according to the FDIC.
Cons
Potential for disagreements: As all account holders share equal access to funds in a joint account, there is potential for disagreements or misuse of funds by any given party without the others’ consent.
Joint liability: All account holders are liable for fees such as overdraft charges, regardless of who caused them.
Lack of privacy: Joint accounts may raise privacy concerns as each account holder can see all transactions and account activity.
How To Close a Joint Bank Account
While just one of the account holders can technically close most joint bank accounts, it’s best to coordinate between all account holders before going this route.
To close a joint account, it may be beneficial to follow these key steps:
- Discuss and agree with all account holders on the decision to close the account.
- Cancel any automatic payments or deposits linked to the joint account to prevent future transactions.
- Withdraw the remaining balance or transfer the funds to another account (or accounts) as agreed upon by all parties.
- Contact the bank to initiate the closure process, which may involve filling out a form online, confirming over the phone or visiting a branch in person.
- As required by the bank, provide any necessary written consent from all account holders to finalize the closure.
Following these steps can ensure a smooth and conflict-free closure of the joint bank account. Clear communication can also help safeguard the financial interests of all the involved parties.
Is a Joint Bank Account Right for You?
Before opening a joint account, there should be mutual trust among all co-account holders that all individuals can responsibly manage the account without overstepping boundaries or misusing funds. Discussing each account holder’s financial habits, goals and expectations beforehand can prevent future misunderstandings and conflicts.
Joint bank accounts are particularly beneficial for the following:
- Couples: For couples managing household expenses or saving for shared goals, such as a wedding or a home, a joint account can streamline finances.
- Family members: Adult children assisting with their aging parents’ expenses or parents wanting to teach financial responsibility to their teenagers might find a joint account useful.
- Business partners: Business partners who want equal access to funds to make business transactions run easier and smoother may prefer a joint bank account.
The Bottom Line
A joint bank account offers a practical solution for managing shared expenses and working toward common goals, but it’s crucial to approach this decision with care.
With that in mind, opening a joint bank account is a significant step that requires understanding, trust and clear communication between all parties involved. By carefully considering the pros and cons, you can make an informed decision that aligns with your — and your potential co-owner’s — financial goals.
Frequently Asked Questions About Joint Bank Accounts
Yes, a joint account holder can empty or close an account without the consent of the other account holder(s). Each owner has equal access to the funds and the authority to make transactions, including withdrawing all the money or closing the account.
The tax responsibility for interest earned in a joint account typically falls on both account holders.
- If the account holders are married and file a joint tax return: The couple will report the interest income together.
- If they file separately or are not married: Each account holder may be responsible for reporting their share of the interest income, depending on state laws and the agreements with the financial institution.
Having a joint bank account itself does not directly impact your credit score, as bank account information is not reported to credit bureaus. However, if the account becomes overdrawn and the bank turns the account over to a collection agency, that could negatively affect both account holders’ credit scores.
Editor’s Note: Before making significant financial decisions, consider reviewing your options with someoneyou trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
Hillary GaleContributing Writer
Hillary Gale is a personal finance writer who focuses on financial planning, investing, and money mindsets. She is the CEO and founder of Gale Creative Agency, a boutique digital marketing firm that develops marketing strategies and content for financial services brands. Hillary has been published in Clever Girl Finance and Wealthtender.
David GregoryEditor
David Gregory is a sharp-eyed content editor with more than a decade of experience in the financial services industry. Before that, he worked as a child and family therapist until his love of adventure caused him to quit his job, give away everything he owned and head off to Asia. David spent years working and traveling through numerous countries before returning home with his wife and two kids in tow. His love of reading led him to seek out training at UC San Diego to become an editor, and he has been working as an editor ever since. When he’s not working, he’s either reading a book, riding his bicycle or playing a board game with his kids (and sometimes with his wife).
