Joint Bank Accounts: How Do They Work and Should You Open One?

With a joint bank account, two or more people own the account. You can pool some or all of your money in the joint bank account with a partner or family member. By having a designated place for your funds, it can be easier to manage your money and relationship. It might help you maintain a family budget or split the cost of living expenses with a partner. There can be other perks and drawbacks to joint bank accounts, so read on to learn if one is right for you.

Why Open a Joint Bank Account?

Opening a joint bank account can offer you many perks and savings. Here are the main advantages:

Easier to work toward shared savings goals: With a joint account, you can better determine how much you can sock away each month. You can see your combined progress and encourage each other along the way.

Helps create a budget: When you combine funds and decide how you’ll pay for certain bills, a budget is naturally created. Talking about financial decisions can help you hone your savings and scale back on spending.

Less temptation to splurge: When you’re financially teamed up, you can help hold each other accountable, including how you spend your discretionary income.

Easier to meet minimum balance requirements: Certain banks require a minimum amount of money to stay in your checking or savings account at all times. By pooling your funds with someone else, you’re more likely to meet that minimum—often saving you fees and possibly earning you perks.

Higher interest rates and more perks: If you have a larger balance in your bank account, you might be able to get a higher interest rate or better perks like a cashback credit card.

Parents can manage finances easily: Joint bank accounts give you access to monitor your child’s spending. You can see exactly where the money goes in real-time. You can also help your child financially by putting funds into a shared account that can be used for expenses like gas and groceries.

Gives the co-owner the right of survivorship: Most joint bank accounts have the right of survivorship. This means when a co-owner dies, the other co-owner becomes the sole owner of the account and funds. You can designate a different beneficiary, though, if you want.

The Drawbacks of a Joint Bank Account

A joint bank account isn’t right for everyone and every situation. It’s important that you completely trust the person with whom you’re linking your bank account. Both account holders have 100% rights to all the money in the account. With a joint account, the other co-owner can legally spend all the money in the account without consulting you—whether it’s your partner or your child.

Creditors and debtors can also come after money that’s owed to them. For example, if a spouse had an account sent to debt collections, the debtor could have the legal right to sue you for payment using funds in your joint bank account. Your bank account co-owner can also incur overdraft fees and other penalties. That’s why it’s critical to consider these aspects carefully before opening a joint bank account.

Other Options

Besides joint bank accounts, there are other options for merging and managing your money. Here are some alternatives to joint bank accounts:

View-only account: With a view-only account, you can see someone else’s bank activity. You’ll know how much they’re spending and saving without being a co-owner of the account. You have the ability to monitor finances without full access and shared responsibility.

Payable-on-death (POD) designation: If you’ve identified someone to give your money to when you pass away, you don’t need a joint bank account. You can set up a payable-on-death (POD) account by designating a beneficiary to inherit the money in your account, which is a free and simple process at any bank.

Durable financial power of attorney: Designating someone as a financial power of attorney gives them the legal authority to manage your finances if you become incapacitated and unable to make decisions. You need to complete a power of attorney form and sign it in the presence of a public notary.

Linked accounts: Instead of a joint account, you can link bank accounts with a partner or child. With linked accounts, you can transfer funds back and forth to pay for items like living expenses. You can link both savings and checking accounts for ease.

Take your time to consider all your options for sharing money and building credit history. For those working on building financial skills or establishing credit, a joint bank account can be a great option.