A joint bank account can make your financial life easier and less complicated if you manage your money with another person, such as a spouse or partner. But while a joint savings or checking account offers many everyday banking conveniences, there are some factors you should consider before opening a joint bank account rather than opening one on your own.
What is a joint bank account?
A joint bank account is an account that you share with another person for things like paying the bills, depositing paychecks or saving for a vacation or down payment for a car.
Most often, joint accounts are held by one individual and a significant other, family member or business partner. However, any two people can open a joint bank account together if they choose.
Benefits of a joint bank account
The biggest perk of opening a joint account is the convenience of having money in one place. A joint bank account can be helpful if you and someone else have joint responsibilities, like running a household or business, as it allows you to both contribute to and withdraw from the account, says Lauren Anastasio, a financial planner at SoFi, an online personal finance company. And pay the bills, of course.
“This gives multiple people access to the account to help divvy up responsibilities,” Anastasio says.
If you’re a married couple who shares money and bills, for example, then having a joint account could make managing your finances much easier. After all, a joint account lets both of you cover expenses and pay bills with the money you share, versus having to have separate accounts and figure out how to “split” bills in another way.
Joint accounts can also help couples take advantage of benefits that may not otherwise be available to them, says Kevin Condon, SVP of consumer deposit and small business product management at Bank of America. For example, pooling your money can help you meet the minimum balance requirements needed to get benefits like getting maintenance fees waived or rewards that result in lower interest rates on loans.
Finally, joint ownership can also increase the amount of FDIC insurance coverage. Ravi Kumar, head of CIT Bank, says that each co-owner of a joint account is insured up to $250,000 for the combined amount of his or her interests in all joint accounts at the same insured depository institution. For example, if you owned your own account with a balance of $500,000, you’d only be insured by the FDIC up to the $250,000 limit. But if that same $500,000 was deposited in a joint account with your spouse or partner, your money would be insured for the full amount.
Is a joint bank account right for you?
If you’re wondering who owns the money in a joint bank account, that’s an excellent question. Corbin Blackwell, a financial planner at Betterment, says it’s also one that should lead you to think long and hard before opening a joint account with just anyone.
“Because joint accounts mean joint ownership, you should only fund a joint account if you completely trust the joint owner, as they will have access to funds that you deposit into the account,” she says. If you share an account with someone who has trouble sticking to a budget, you could see more money being taken out of the fund than you’re comfortable with. And according to Capital One, “If one account holder lets debts go unpaid, creditors can pursue money in the (joint) account for settlements.”
Some examples of times when a joint bank account makes sense can include:
- Couples who manage their money together and share household expenses
- Adult children sharing a joint bank account with their elderly parents
- Business partners sharing a joint business account they use to cover expenses and payroll
- Parents opening a joint account with their children and helping oversee their savings as they learn positive money habits
Michael Foguth, a financial planner at Foguth Financial Group in Brighton, Mich., says that it’s best to only open a joint account when you’re actually sharing funds with another person.
“If you like to keep your money private, then a joint bank account isn’t for you,” he says.
How to open a joint bank account
When it comes to opening a joint bank account, the process isn’t that different from opening your own account. You can sign up for joint accounts at most banks online. For example, you can sign up for a joint Cash Reserve account at Betterment. You don’t even have to be married.
When you open a joint account, both account applicants have to provide personal information, such as email address, name, address and phone number, as well as Social Security number and a date of birth.
You can also open a joint bank account by visiting a brick-and-mortar banking location and providing the same information in-person. Conversely, you can add another person to an existing bank account in most cases, usually by contacting the bank and providing all the personal information they require.
How to close a joint bank account
According to Foguth, closing a joint account is similar to closing any other bank account. You may be asked to visit a physical banking branch in order to close an account, and all account holders may or may not need to be present.
With that being said, you should make sure you have proof of your identity (like a valid photo ID, such as a driver’s license) before you close a joint account. You will also need to withdraw or transfer all funds from the account before you can close it down. And you will typically need to fill out a form requesting the closure, either online or in-person.
In some cases, you may also be able to fax, email or mail a request to close a joint account. If your joint bank account is with an online bank that doesn’t have any physical locations, each individual account holder may need to enter their log-in details and approve the closure.
Keep in mind that there are risks involved in opening a joint bank account, including the risk that one account owner goes rogue and withdraws all the money, or the risk of collections activity. However, joint bank accounts definitely have their place, and they can work for a wide range of consumers, especially couples who share household finances.
Whether to open an account with another person is a personal choice. Just make sure you know the pros and cons, and that you approach any joint account you have with an abundance of caution.