A joint bank account is simply an account that you can share with your partner, housemates, or family. With a joint account, all account holders are entitled to make and view transactions, hold a bank card, and pay money in.
Joint bank accounts are often used as an easy and transparent way to manage shared finances. For example, a couple living together may open a joint account so they can pay in money that will then be used to cover the cost of their rent or mortgage, and other bills. Some people who live in shared housing also open joint accounts for the same thing, sharing the bill-paying responsibility among all tenants.
However, there are a few potential risks that you need to be wary of when considering if this is the best solution for you. The most obvious risk is that you need to trust whomever you open a joint account with – they have as much right to the money in the account as you do, and you’re unlikely to be able to control or restrict this.
Many people aren’t aware that opening a joint bank account creates an association with the other account holder(s) in your credit report – and this means that if they have a poor credit rating, yours may suffer as a result. And if the account were to go overdrawn, because another account holder has mismanaged the account, all account holders are liable for this.
How does a joint account work?
A joint bank account works in much the same way as a personal account belonging to an individual. Most banks allow only two account holders, but some allow up to four people – which is great for people who share a household.
You can set up direct debits and standing orders, so it’s easier to pay household bills. And as a joint account holder, you are given a debit card and may get a cheque book as well. Furthermore, each account holder can view all the transactions on the account, which means you can keep track of how the money is spent and where.
Joint bank accounts are a big commitment
You need to think carefully before you make a financial commitment like a joint bank account. As mentioned above, a joint account carries a number of risks and you need to trust the person(s) you decide to open one with.
If you’re thinking about whether opening a joint account as a couple is the right move, it’s wise to consider your spending styles: are you financially in-sync? If you have the same attitude to money and spending then this could be a smooth arrangement, but if don’t then you may want to think about using a joint account to manage bills alone, rather than combining your finances entirely.
It’s also important to understand that if the relationship were to break down, a joint account is vulnerable to one person withdrawing the balance and leaving the other person high and dry. This can be mitigated if you suspect trouble is coming down the line: you can ask the bank to freeze the account while you agree what to do with the balance.
If you’re thinking about opening an account with the people you live with, it’s important to consider how financially savvy they are. As well as the risk of being associated with someone who has a much lower credit score than you, having a joint bank account means you’re equally liable for someone else’s mismanagement of the account. If one person was to run up debts on the account, everyone would be responsible for this.
However, it may be possible to set up a requirement on the account that means everyone needs to give their permission for expenditure outside the normal run of standing orders and direct debits. You should discuss this with your prospective bank to see if it’s possible.
As a joint account holder, you are given a debit card and a cheque book. You can also set up direct debits and standing orders, so it’s simple to pay household bills
How do you open a joint account?
It’s very easy to open a joint account. You can apply online or in branch, and each account holder will need to:
- Complete an application form with their personal details.
- Provide proof of address, such as a utility bill or other bank statement.
- Provide proof of identity, such as a passport or driver’s licence.
However, when opening a joint account, the bank or building society should explain about the extra rights and responsibilities involved before you open the account.
They should tell you the following:
- Whether one individual can take out all of the money without the others knowing or giving their permission.
- If each person is individually responsible for paying back the whole amount of any overdraft on the account.
- What to do if your relationship with a joint account holder ends.
When you open a joint bank account, the bank or building society will ask you to sign a mandate. The mandate is important because it sets out how the account is run and outlines your responsibility over the account.
Credit scores can be affected
Bear in mind that the credit record of the other account holder will have an impact on your own score if you have held a joint bank account together.
So, if they have a bad credit history or run into financial problems in the future, it could affect your ability down the line to get credit, even in your own name. But on the other hand, if they have a spotless credit record, it could make it easier for you to borrow money.
What about overdrafts?
Your joint account will almost certainly come with an overdraft facility. But take care because overdrafts can cause disagreements between joint account holders, which can lead to a lot of financial trouble.
The most important thing to remember is that any account holder may be able to run up an overdraft on a joint account without your permission. And if the account goes overdrawn, each joint bank account holder is responsible for the whole of the debt. In other words, you could end up footing an unfair bill.
Do you have multiple accounts with one bank?
Be aware that, if you have a joint account and a sole personal account with the same bank or building society, then the bank can transfer money from your personal account to cover a debt on your joint account.
However, the bank can’t transfer money out of your joint account to cover a debt on your sole account, unless all the joint account holders agree.
What happens if you need to close the joint account?
If the relationship breaks down, or your housemates decide to go their own ways, the best option is probably to close the joint account. You can then divide the money between you, but the bank will need all account holders to agree – usually in writing.
You could also change the account into one name only. Again, the bank would usually need the written permission of all parties.
If it’s a joint account with a partner, and the split is acrimonious, either one of you can cancel the mandate. The account is then frozen so no one can use it, including you. The bank will only thaw the account when everyone agrees how to split the money. If you can’t reach an agreement, the courts will decide for you.
Legal rules on dividing joint bank accounts
The courts look at joint bank accounts differently depending on your relationship with the other account holders and where you live.
For example, if you live in England or Wales and have a joint account with your spouse or civil partner, the money will be split equally, even if one of you never paid in a penny. But if you share your joint account with anyone else, perhaps a sibling or a group of friends, the cash will be divided up according to the amount you contributed.
Joint accounts are covered by the Financial Services Compensation Scheme (FSCS), which, from 16 January 2017, guarantees savings up to £85,000, or £170,000 for a couple, for each authorised bank or building society.
Pros and cons of having a joint account
It can be easy to manage your household finances with a joint account.
The other account holder(s) can empty the account of cash.
You can earn more interest because there is often more money in a joint than a sole account.
Each account holder is responsible for any overdraft on the joint account, even if they did not run up the debt.
Any money left over after payments and bills are paid can be saved or used for something unrelated.
It might not be easy to access your money if the relationship breaks down.
How to compare the best joint accounts
The easiest way to find the best joint account for your circumstances is to use MoneySuperMarket to compare different accounts with different providers. As joint accounts are just current accounts but for more than one person, the best thing to do is to compare current accounts, decide which one suits you, and then apply online.
When you compare current accounts with MoneySuperMarket, you will be asked what type of account you want, and any features you wish the account to have, such as online banking or cashback, and any benefits.
We will then give you a list of accounts we think can help you. They all feature a ‘great for’ and ‘but be aware that’ section to guide you when you pick the account for you.
Want to know more about finding the right bank account? Read our guide on finding the best current accounts in the UK.