If you’ve recently gotten married or moved in with your mate, you may wonder whether it makes sense to combine your funds in a shared account, or to continue keeping your finances separate.
Opening a joint checking account can make it much easier for a couple to pay, plan, and track household and other shared expenses. The trade-off to that convenience, however, is giving up some of your financial privacy and independence.
To help you decide if opening a joint account makes sense for your situation, read on. We’ve got all the pros and cons, plus tips on how to open a joint account, along with some alternatives to consider.
How Does a Joint Account Work?
A joint account functions just like an individual account, except that more than one person has access to it.
Everyone named on a joint account has the power to manage it, which includes everything from deposits to withdrawals.
Any account holder can also close the account at any time. And, all owners of a joint account are jointly liable for any debts incurred in relation to the account.
Two or more people can own a joint account–and, they don’t have to be a married couple or even live at the same address.
You can open a joint account with an aging parent who needs assistance with paying bills and managing their money. You can also open a joint account with a teenage child, friend, roommate, sibling, or business partner.
Recommended: How to Combine Bank Accounts
Benefits of Having a Joint Bank Account
Here are some of the pros of opening a joint account.
• Ease of paying bills. When you’re sharing expenses, such as rent/mortgage payments, utilities, insurance and streaming services, it can be a lot simpler to write one check (or make one online payment), rather than splitting bills between two bank accounts. A shared account can simplify and streamline your financial life.
• Transparency. With a joint checking account, there can’t be any secrets about what’s coming in and in and what’s going out, since you both have access to your online account. This can help a newly married couple understand each other’s spending habits and talk more openly about money.
• A sense of togetherness. Opening a joint bank account signals trust and a sense of being on the same team. Instead of “your money” and “my money,” it’s “our money.”
• Easier budgeting. When all household and entertainment expenses are coming out of the same account, it can be much easier to keep track of spending and stick to a monthly budget. A joint account can help give a couple a clear financial picture.
• Banking perks. Your combined resources might allow you to open an account where a certain minimum balance is required to keep it free from fees. Or, you might get a higher interest rate or other rewards by pooling your funds. Also, in a joint bank account, each account holder is insured by the FDIC, which means the total insurance on the account is higher than it is in an individual account.
• Fewer legal hoops. Equal access to the account can come in handy during illness or another type of crisis. If one account holder gets sick, for example, the other can access funds and pay medical and other bills. If one partner passes away, the other partner will retain access to the funds in a joint account without having to deal with a complicated legal process.
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Challenges of Having a Joint Bank Account
Despite the myriad advantages of opening a joint account, there are some potential downsides to a shared account, which include:
• Lack of privacy. Since both account holders can see everything that goes in and comes out of the account, your partner will know exactly what you’re earning and how much you are spending each month.
• Potential for arguments. While a joint account can prevent arguments by making it easier to keep track of bills and spending, there is also the potential for it to lead to disagreements if one partner has a very different spending style than the other.
• No individual protection. As joint owners of the account, you are both responsible for everything that happens. So if your partner overdraws the account, you will both be on the hook for paying back that debt and covering any fees that are charged as a result. If one account holder lets debts go unpaid, creditors can, in some cases, go after money in the joint account.
• It can complicate a break-up. If you and your partner end up parting ways, you’ll have the added stress of deciding how to divide up the bank account. Each account owner has the right to withdraw money and close the account without the consent of the other.
• Reduced benefits eligibility. If you open a joint account with a college student, the joint funds will count towards their assets, possibly reducing their eligibility for financial aid. The same goes for an elderly co-owner who may rely on Medicaid long-term care.
How to Open a Joint Bank Account
If you decide opening a joint account makes sense for your situation, the process is similar to opening an individual account. You can check your bank’s website to find out if you need to go in person, call, or just fill out forms online to start your joint account.
Typically, you have the option to open any kind of account as a joint account, except you’ll select “joint account” when you fill out your application or, after you fill in one person’s information, you can choose to add a co-applicant.
Whether you open your joint account online or in person, you’ll likely both need to provide the bank with personal information, including address, date of birth, and social security numbers, and also provide photo identification. You may also need information for the accounts you plan to use to fund your new account.
Another way to open a joint account is to add one partner to the other partner’s existing account. In this case, you’ll only need personal information for the partner being added.
Before signing on the dotted line, it can be a good idea to make sure you and the co-owner know the terms of the joint account. You will also need to make decisions together about how you want this account set up, managed, and monitored.
Alternatives to a Joint Bank Account
If you’re not keen on opening a joint bank account, but do need some type of money management system, here are some alternatives you may want to consider.
• Adding an authorized user to an existing individual bank account. An authorized user has access to the account, but they’re not an owner. You still have full control, which means you can remove them from the account at any time.
• Joint bank account, plus separate accounts. This allows couples to streamline payment for shared expenses, but also gives each partner some freedom to spend on themselves without having to explain or feel guilty about their expenditures.
• View-only account. A view-only account gives another person the opportunity to view transactions, but they don’t have the power to manage the account.
• Joint credit card. A joint credit card allows both you and your partner to use it. If your partner isn’t responsible with the card, however, it can affect both of your credit scores.
One of the main pros of opening a joint checking account as a couple is that it can simplify paying for shared expenses. Having a joint account can also provide a couple with a clear financial picture, and make it easier for them to track spending and stick to a budget. A joint account also fosters openness and teamwork.
On the downside, sharing every penny can sometimes lead to tension and disagreements, especially if partners have different spending habits and personalities. And, if your partner isn’t responsible with money, you can end up paying for their mistakes.
If you decide to open a joint account, communication can be key. It can be a good idea to lay out expectations with the other account holder and also have regular open and honest discussions about money.
Looking for Something Different?
For couples who are ready to integrate their finances, SoFi Checking and Savings® makes it easy to create a joint account that gives couples shared access to their money.
When you open an online bank account with SoFi, you’ll have the option to add a joint account holder. Your partner will then receive an application and, once they fill it out, you can simply approve them as a joint owner of the account from your SoFi account dashboard.
Whether you opt for two individual or one joint account, you and partner won’t pay any account fees, monthly fees, or other common fees.
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