Joint Bank Accounts: What They Are And How They Work | Bankrate (2024)

Portions of this article were drafted using an in-house natural language generation platform. The article was reviewed, fact-checked and edited by our editorial staff.

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. A joint savings or checking account offers many everyday banking conveniences, but there are some factors to consider before opening one.

Key takeaways

  • Joint bank accounts are an ideal option for couples, business partners, and parents with and children who want to share access to their money, but it's important to only open an account with someone you trust.
  • Joint bank accounts offer many benefits, such as convenience, a larger account balance, and more FDIC insurance coverage, but they also have potential pitfalls such as overdrafts and a lack of privacy.
  • When opening a joint bank account, both account holders must provide a government-issued ID and personal information. To close the account, both parties must provide signatures or written permission.

What is a joint bank account?

A joint bank account is an account shared with another individual for things such as paying the bills, depositing paychecks or saving for a vacation or down payment on a large purchase, such as a house or car.

Most often, joint accounts are held by one person and a spouse or partner, family member or business partner, but it’s possible for two people to open a joint bank account together (and in the case of a bank account for a minor, a parent and their child).

How do joint bank accounts work?

Joint bank accounts work similarly to other bank accounts. Joint checking accounts work like checking accounts, letting you write checks and use a debit card. Joint savings accounts work like traditional savings accounts, keeping your money safe and paying interest.

The primary difference is that both people who own the account have full control over it. Each account owner can get a debit card, write checks and make purchases. Both account holders can also add funds or withdraw them from the account.

The money in joint accounts belongs to both owners. Either person can withdraw or spend the money at will — even if they weren’t the one to deposit the funds. The bank makes no distinction between money deposited by one person or the other, making a joint account useful for handling shared expenses. But a joint bank account should only be opened with someone you trust, since that person has equal control over the account’s funds.

Pros of a joint bank account

Although joint bank accounts can be useful for anyone who wants to share access to their money, they’re particularly beneficial for these reasons:

Convenience

Joint bank accounts make it easy to pay bills and track expenses, as each account holder can see the balance and add money to the account. If you pay for utilities, groceries and other joint household expenses, you could use the account to streamline bill payments by linking the account to your online banking service.

A potentially larger account balance

Because there are two account holders, joint accounts can have a larger balance than individual accounts. This could help you earn more interest on savings or avoid penalty fees.

More FDIC insurance coverage

You have insurance coverage at banks that are insured by the Federal Deposit Insurance Corp. (FDIC) (and at credit unions insured by the National Credit Union Administration) for up to $250,000 per depositor, per insured bank, for each account ownership category. Because joint bank accounts are opened with two individuals, each account holder gets up to $250,000 of FDIC coverage, potentially bringing your total coverage to $500,000.

Facilitating collaborative decision making

A joint account can be a useful tool for partners looking to save for a down payment on a home, plan a wedding or save for a shared future. A joint account makes it easy for both account holders to deposit money and make withdrawals, allowing each person to feel like an equal participant. In relationships, this can improve communication and encourage each partner to get involved in financial decisions.

Assisting elderly parents with financial management

If your parents are getting older, they may need some help with financial management, such as paying bills, reviewing bank statements and tracking expenses. Setting up a joint account with your parents will allow you to give money to them when they need it and allow you to help manage their finances.

Overseeing a child’s spending

If you’re a parent with a child who is leaving for college, it may be smart to open a joint bank account with your child. The account gives you access to the account so you can transfer funds to your child or check their bank statement to see their finances. However, it also allows your child access to the account so they can learn to handle their own finances and pay bills.

Cons of a joint bank account

Joint bank accounts also have their fair share of cons. Here are a few of the potential pitfalls you should keep in mind before opening a joint bank account.

Potential for overdrafts

With a joint bank account, both parties have unrestricted access to any funds in the account, which could potentially lead to misuse or mismanagement. For example, if one person withdraws more money than there is in the account, the other partner will also be on the hook for any overdraft fee.

Trouble if your relationships ends

When you split up with a partner, having a joint account can make things complicated. If you have an account with a friend, family member or your partner, you may want to consider closing the account and opening a new one if the relationship ends. Not only will you want to remove the person as joint owner of the account, you’ll also want to avoid any arguments over how to divide the funds.

Subject to creditors

Another downside of joint bank accounts is that both parties are responsible for any debts the other person may incur. This means that even if one person loses a lawsuit and owes money to a creditor, the other person is liable for the debt as well.

Lack of privacy

Because both you and the other account holder can see each other’s transactions and financial activities, it can be harder to keep gifts secret. Since joint bank accounts make it harder to keep secrets and can reduce privacy between partners, it can put a strain on the relationship. If you have a joint account, discuss boundaries around spending and saving with the other account holder. Make sure you are both on the same page about how the money will be used and what information is off limits.

Is a joint bank account right for you?

For many joint account owners, sharing the responsibility of managing money comes down to one personal characteristic: trust. If you’re planning to share a bank account, think long and hard about who you share it with.

If, for example, you share an account with someone who has trouble sticking to a budget, you could run the risk of seeing your money in the account being withdrawn faster than you can say “balance inquiry.” Only open a joint bank account with someone you trust implicitly because they’ll have access to the funds you deposit and financial information of that account.But opening a joint bank account can be a win-win situation, especially for two people who are on the same financial wavelength. “A joint bank account makes sense – and can make things easier — for those that incur expenses jointly or have common savings goals, such as a down payment on a home,” says Greg McBride, CFA, chief financial analyst for Bankrate.

Some examples of times when a joint bank account makes sense are:

  • Couples who manage their money together and share household expenses
  • Adults sharing a joint bank account with their elderly parents
  • Business partners sharing a joint business account to cover expenses and payroll
  • Parents opening a joint account with their children to oversee their savings as they learn positive money habits

How to open a joint bank account

Opening a joint bank account is fairly straightforward. You can either select the “joint account” option on an application or add a co-applicant after filling in one person’s details. Each co-owner must provide a government-issued ID and some banks may require proof of address.

The application will also require the personal details of each account holder, including their full name, date of birth, Social Security number and contact information.

Not all banks or credit unions offer joint bank accounts, so if you’re interested in opening one, make sure the bank you choose does so before signing up for an account.

You may also want to discuss with your partner or other potential account holder what happens to the account after one of you dies. For example, if you name your partner as a beneficiary on your life insurance policy but then both of you die in an accident, the life insurance payout might go directly into the joint account. If you don’t want that to happen, you could update your beneficiary.

Finally, it’s important to note that joint bank accounts are not a substitute for a will. If you open a joint bank account, you must still create a will or trust that details how your assets should be distributed after you die. Otherwise, state law will determine who will inherit your assets.

How to close a joint bank account

When you have a joint bank account, you need to consider more than just your own finances. If you need to close the account, you’ll have to work with the shared account owner and follow these steps:

1. Discuss with the other account holder. If an account holder has changed their mind about having a joint account and wants to quit, you’ll need to discuss it, particularly if you have other shared finances.

2. Withdraw all money. You will want to withdraw all money in the joint bank account before closing it. However, before withdrawing the funds, both account owners need to discuss the fund breakdown and agree on how much they’ll withdraw as their respective allotment.

3. Close the account. Some banks require both account owners to close a joint account, providing written permission, though many banks allow for just one of the account holders to close the joint account. Review your account agreement and the bank’s policy first. If you don’t have a separate, individual bank account to move your funds into, you can open one in your name before closing the joint account.

Who pays taxes on a joint account?

If you and your joint account holder are married and file one tax return, all you have to do is include the interest in your tax filing. If you file separately or aren’t married, things get more complex, depending on which state you live in. Check with a tax advisor if you have questions.

Another thing to consider if you have a joint bank account with someone who isn’t your spouse is gift taxes. If you deposit a significant sum to a joint bank account and your joint account holder makes a large withdrawal, it may trigger gift taxes. For 2023, the annual gift tax exclusion is $17,000, so the trigger will be pulled only if the joint account holder withdraws more than $17,000 from the account without making any deposits. Consult with a tax advisor for advice, should you have questions.

Bottom line

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. Joint bank accounts nevertheless have their place and 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 decision to open a joint account with caution.

– Bankrate’s René Bennett updated this article and TJ Porter contributed to a previous version of this article

Joint Bank Accounts: What They Are And How They Work | Bankrate (2024)

FAQs

Joint Bank Accounts: What They Are And How They Work | Bankrate? ›

A joint bank account is a type of bank account that's held by two people, commonly by two people in a relationship. It allows both account holders to pay bills, deposit checks and contribute toward shared savings goals from one place.

What is a joint account and how does it work? ›

A joint account is a bank or brokerage account shared by two or more individuals. Joint account holders have equal access to funds but also share equal responsibility for any fees or charges incurred. Transactions conducted through a joint account may require the signature of all parties or just one.

What are the rules for joint bank accounts? ›

All joint bank accounts have two or more owners. Each owner has the full right to withdraw, deposit, and otherwise manage the account's funds. While some banks may label one person as the primary account holder, that doesn't change the fact everyone owns everything—together.

How do you structure a joint bank account? ›

Opening a joint bank account is fairly straightforward. You can either select the “joint account” option on an application or add a co-applicant after filling in one person's details. Each co-owner must provide a government-issued ID and some banks may require proof of address.

What happens in a joint bank account? ›

It is an Account owned and operated by two or more people. All Account holders have equal ownership with the same access and rights to the funds held in the Account. These Accounts are particularly suited for couples, family members and business partners who want to share financial responsibility.

Who owns the money in a joint bank account when one dies? ›

Joint Bank Account Rules on Death

"The joint owner becomes the legal and equitable owner of all funds in a joint account at the instant of death," says Doehring. "It does not become part of the probate estate."

What are the disadvantages of joint account? ›

You cannot control how the other party spends your money. If your partner decides to spend frivolously, you will both feel the blow. This sort of problem can lead to many fights about what is necessary to spend on and what isn't. More of these issues may arise if one party brings in more income than the other.

Can I sue someone for taking money from a joint account? ›

Either party may withdraw all the money from a joint account. The other party may sue in small claims court to get some money back. The amount awarded can vary, depending on issues such as whether joint bills were paid from the account or how much each party contributed to the account.

Who is the primary account holder on a joint account? ›

Primary account holders are legally responsible for the account. Primary account holders can name others as "authorized users" on the account, but they remain responsible for it. Joint account holders share responsibility for that account and both are considered primary account holders.

Who pays taxes on a joint account? ›

If you have a joint account, you both may have to pay taxes on a portion of the interest income. However, the bank will only send one 1099-INT tax form. You can ask the bank who will receive the form because that person has to list the income on their tax return.

Do you need both parties to open a joint bank account? ›

Both parties do not necessarily need to be present to open a joint checking account. Many accounts today can be opened online, therefore, both parties do not need to be present but the identification of both parties will need to be provided.

Can someone on a joint account see my other accounts? ›

As long as you are on a joint account, the other account holders can see everything. At 18 you can open your own account and then you will have privacy. When you transfer money out of the joint account, however, your parents will know.

What are the risks of opening a joint bank account? ›

Equal Responsibility: A joint banking account puts all co-owners on the hook for any overdrafts or issues associated with the account. This means the account assets are open for seizing to creditors, liens, and lawsuits if other co-owners get into financial or legal troubles.

What are the legal issues with joint accounts? ›

Joint Accounts and Creditor Issues

A potential issue with joint accounts is that it makes the account vulnerable to all creditors from each owner. Creditor issues affecting one owner therefore affect the other owner.

Can a spouse takes all money out of joint account? ›

Many married couples have joint bank accounts. Each spouse has the right to make deposits into the account, and, each spouse has the right to withdraw from the account any amount up to the total balance. It's common for married spouses to have joint accounts for practical and romantic reasons.

What are the disadvantages of a joint account? ›

Loss of Individual Control: One of the primary drawbacks of a joint savings account is the loss of individual control over funds. Each account holder has equal rights to the account, which means that any account holder can withdraw or transfer funds without the consent of others.

Is there a downside to joint account? ›

Cons of joint bank accounts

Co-owners on the account are both responsible for fees, such as overdraft charges. If one holder lets debts go unpaid, creditors can go after money in the joint account. Both holders can see transactions in the account, which can present privacy issues.

Is it a good idea to have a joint bank account? ›

Having a joint bank account can help couples work together on finances and money goals. Keeping separate accounts might work better if you and your partner have very different money management styles. Holding a joint account as well as individual accounts might be the best solution for some.

Can my wife empty your joint account? ›

If the funds in your joint bank account are considered separate property and owned exclusively by your spouse, they may legally be able to drain the account. Similarly, even if the account is community property, a spouse may be able to withdraw money for reasonable living expenses, legal fees, and children's expenses.

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