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Is Having A Joint Bank Account A Good Or Bad Idea?

A joint bank account can come in handy when you are planning to share expenses with someone. For instance, you can open this account if you are living with your partner or saving for a holiday with a friend. However, the account can also be risky if the relationship with your partner goes sour. In this guide, we will explain everything that you need to know about joint bank accounts and when they are a good or bad idea.

What Is A Joint Bank Account?

A joint bank account is an account that is shared between one or more people. Those sharing the account do not necessarily have to be a couple. However, around 65% of those who share joint accounts are spouses. Housemates, business partners, or friends can open the joint account. Having a joint account makes it easier for those involved to pay their household bills easily. As well as managing their shared incomes more easily. Nonetheless, the account creates a financial link between the partners which may be a good or bad thing.

To evaluate if combining the finances is ideal for you, you should consider the following:

Advantages of Joint Accounts

  • It makes it simpler to pay shared household expenses and joint bills because one partner is not responsible for always paying the bills.
  • It is easier to manage because paycheques are deposited in one account, and all bill payments, savings, and mortgage payments are withdrawn from that account. Maintaining daily tasks becomes effortless because the money comes in and goes out of the same account.
  • For couples, it creates equality. For couples where one partner stays at home with the children or works less, a joint account can offer an equal way of sharing finances even when their income is unequal.
  • It promotes teamwork in the relationship. When both parties put their money in one account and trust each other, their mindset shifts from “my money” to “our money.”
  • For newlyweds, merging finances can help them track what they are spending money on and understand their partner’s spending habits. This can help them spot irresponsible spending and address it before on time before it leads to missed payments.

Disadvantages of Joint Bank Account

  • It makes things complicated in the event of a break-up or divorce. Since the money is saved in one account, it may be difficult to separate it when you break up.
  • It offers no privacy, and each transaction made is transparent. If there are no rules about spending, your partner may purchase something expensive, and you may find out the hard way when your card is declined.
  • It may hurt your credit score. Before opening a joint account, it is recommendable to check your partner’s credit record. Normally, if you open a shared account, you will be “co-scored’ therefore, it is advisable to share an account with a person who has a good credit score to avoid ruining your credit record.
  • If any of the parties overdraws on the joint account, all those involved with that account will be legally responsible for the account overdrawn status. Therefore, it will not matter who is the spender or who caters for the bills. Both the good and bad will be linked to the account, and it will show on your credit rating.
  • If a person is making more than their partner, the one making more may feel that the other partner is getting more than what he/she is contributing.

How to Open a Joint Bank Account

The only difficult thing about opening a shared account is deciding if it is the right decision. As well as finding the right person to share the account with. The rest of the process is easy. Most financial institutions allow their clients to open the account online. Therefore, you will only be required to choose the account that best suits your needs based on what the organisation is offering.

When applying, you can decide to create a joint account or choose to add a co-applicant(s) who will become co-owner(s) after the application is approved. The requirements needed for the application may vary among financial institutions, but the application will require the option to create a shared account.

Nonetheless, co-owners of a joint account will be required to provide their personal information.

You should also note that conflicts can arise because the members sharing the account will have equal rights; therefore, anyone can change details, withdraw, deposit, or transfer money in the account without your consent. Some of the conflicts that can arise are:

  1. Spending habits may create issues. For instance, if you like to spend on finer things and your partner is into cheap stuff. That could create problems.
  2. There could be cases of transferring or stealing money out of the account. It would be difficult to get it back because the other party is legally permitted to take it.
  3. It is easier for your partner to take advantage of you, especially if you are passive. Since everyone has equal rights in a joint account, your business partner, friend, or spouse can persuade and convince you to participate in illegal actions or follow their orders.

Frequently Asked Questions About Joint Accounts

How Can I Set Up A Joint Savings Account?

The process of opening a joint savings account is similar to that of applying for a solo savings account. The first thing you should do is find a savings account with flexible conditions, high-interest rates, and low fees. Then make sure that the person you are opening the account with is of legal age. You then have to apply for the account and verify your identities and provide your personal details. You then have to select the number of accounts and debit cards that you both need. The last step is to confirm the application, then both of you can begin saving.

Which Is The Best Joint Account In The UK?

Different joint bank accounts have different characteristics, just like other normal accounts; you just have to find what suits your needs best. For instance, you could want to get an account that offers an overdraft so that you could have enough finances when a direct debit is due. You could also want one which offers high-interest rates. The key is to compare features offered by a joint bank account and find one that suits you best. Some of the features you would want to consider are, accounts for bad credit, accounts with benefits, accounts that reward spending and those with zero monthly fees.

Which Is The Best Savings Account To Choose?

Various lenders provide different types of accounts that have varying rewards, overdraft facilities, fees, and interest rates. Compare different accounts to find the one that suits you and your co-owner the most.