Joint Bank Accounts: What You Need To Know

Here's how joint accounts can help couples win with money.

As a long-term relationship progresses toward partnership, financial priorities and goals become part of the conversation. This leads to changes in how to make financial decisions and cover expenses. Whether partners want to admit it or not, money issues can make or break one’s relationship.

According to a TD Bank Survey, 90% of happy couples discussed money at least once a month, compared with 68% of unhappy couples. Moreover, many of these happy couples felt that discussing money strengthened their relationship by keeping their relationship on the same page and by reinforcing shared goals.

However, poor money management can also bring unhappiness. A GOBankingRates survey found that money-related secrets were the number one financial dealbreaker in relationships. And another GOBankingRates survey found that Americans would consider divorcing their spouse if they hid an average of $15,050 of debt from them. Also, 27% would consider divorce if their partner kept financial secrets in general.

To minimize financial secrecy, many couples choose to utilize joint bank accounts. These accounts can facilitate the bill-paying process for a couple. However, they often come with challenges of their own. Understanding both the advantages and pitfalls of joint accounts can help people understand whether this type of account will benefit their relationship.

Here’s what this guide to joint bank accounts will cover:

What Is a Joint Bank Account?

A joint bank account is simply a bank account in the name of two or more individuals who equally share both the rights and the liabilities. This goes beyond married couples: Close relatives, unmarried couples, or business partners open such accounts, too. People who open joint accounts do so when they go into a partnership in which they both share financial expenses and goals.

See: 6 Ways Happy Couples Talk About Money

How Joint Bank Accounts Work

People open joint bank accounts in the same way they open any other account. Both partners must furnish a Social Security number and a photo ID. In some cases, you can also add a partner to an existing account.

After the account is opened, each partner will receive a debit card, checks and login information with which to access the account. As mentioned earlier, both “own” the account and can make account-related decisions without the approval of their partner.

This freedom also allows just one partner to close a joint bank account. The process can also occur online, though both partners must log in, in that case. However, in person, only one partner needs to come to the bank with a photo ID. There, the bank will take you through the process. Once you sign the paperwork, the bank will close the account. Some banks will remit any remaining funds to the person closing the account.

Who Owns the Money in a Joint Bank Account?

All account holders are communally regarded as the “owner” of the account. The right to deposit or withdraw funds in the account depends on the type of joint account. The type chosen by most couples is called a joint-tenancy account. With this arrangement, each owner holds the power to deposit or withdraw funds without the approval of the other partner. If one of the partners passes away, the other partner takes full ownership of the account without going through probate.

Read More: Can My Spouse Access My Savings Account Without Permission?

Joint Bank Account Requirements

Joint accounts have relatively few additional requirements over an individual account. People may think of a joint checking account when couples combine their finances. However, certificates of deposit, joint savings accounts and other types of accounts can also be opened in such a manner. As stated previously, the relationship type matters little, although all partners have to approve the arrangement.

Benefits of Joint Bank Accounts

Joint accounts come with several advantages. The primary advantage is that it solidifies partnerships, facilitating both shared goals and accountability. This extends to areas where they cover joint bills. Partners such as married couples have a place where they can cover their shared expenses such as a house payment, utility bills, taxes or groceries.

Moreover, the joint account becomes a resource in times of crisis or transition. If one spouse loses their job, their finances are banded together, and the financial ties will make it somewhat easier to weather a crisis. As mentioned earlier, should one spouse pass away, control of the account goes to the remaining partner without the lengthy and costly probate process.

See: 6 Benefits of Getting a Joint Bank Account

Joint vs. Separate Bank Accounts

One Kansas State University study called money arguments “the top predictor of divorce.” In generations past, couples often perceived joint bank accounts as a sign of commitment to the relationship. However, a Bank of America survey found that millennials are more likely to keep separate accounts than older generations.

Kathryn L. Bradt of Dames in Debt favors the hybrid approach. Bradt says it allows she and her fiance to “contribute to our life together in a meaningful way” while also getting to spend her money how she wants. Program Manager Amy Brooks, who also utilizes the hybrid system, says she and her husband Todd “never fight about money.” They maintain one account for joint expenses as well as separate accounts for their own needs and wants.

Caretaker Michele Orahood uses her separate account for gifts and personal items such as clothing. She and her husband each contribute a fixed amount to their separate accounts. The Orahoods went so far as to open a joint account to control spending on groceries and on eating out. Orahood describes this as useful, saying “we are seriously paying off debt.”

Despite the benefits, joint accounts come with downsides, as well. Differing spending habits can cause conflict. If one partner does not spend responsibly, the other partner could easily become apprehensive. Moreover, as mentioned earlier, only one partner is required to close an account. In either case, trust becomes necessary to make joint accounts work.

Tips for Joint Bank Accounts

Sharing a bank account can become a challenge. However, both couples and business partners can employ strategies to succeed.

  • Maintain trust and communication. This point may seem obvious. However, without it, maintaining a joint account will not work. It only takes one partner to spend and clear out whatever funds are in the account. Should one partner “steal” the money in the account, the other partner may have little recourse.
  • Create a budget. A budget is simply a plan for each dollar. By following a plan, both partners have an agreement on where the money goes. This eliminates potential conflicts. It also helps ensure that bills get paid.
  • Don’t forget goals. Joint accounts can involve more than just paying monthly bills. In the case of a married couple, it might make sense to set up a separate joint account to set aside money for retirement, financial emergencies, kids’ college tuition or a dream vacation.
  • Set aside discretionary money. Inevitably, partners will disagree on spending. Because money is the No. 1 reason couples argue, having a plan for such disagreements makes sense. Many couples address this by also opening individual accounts, others with agreements on spending. Whatever the strategy couples follow, each partner should gain a measure of independence without compromising each other’s long-term goals.
  • Re-evaluate finances periodically. Time brings change. Over time, partners will have to tweak funding amounts as needs change. Moreover, you may meet a goal such as sending a child to college or completing a remodel. Updating costs and updating the plan for money as needs change will keep your financial future from going off track.

Is a Joint Bank Account Right for You?

If partners have established trust, can budget and share mostly common goals, the natural extension of that relationship likely means opening a joint account. If one of these three elements is missing, the joint account arrangement may fail. However, if the plan can work, not only will a joint account strengthen the relationship, it leaves partners in a better position to achieve goals and cope with unexpected setbacks.

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Will Healy is a freelance financial journalist based in the Dallas area. He has written hundreds of articles on the topics of investing, retirement, personal finance, and economics. He holds an MBA in finance from the Jindal School of Business at the University of Texas at Dallas.

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About the Author

Will Healy is a freelance business and financial writer based in the Dallas area. He has covered a variety of topics, such as stocks, real estate, insurance, personal finance and macroeconomics. In addition to GOBankingRates, his articles have appeared on sites such as InvestorPlace, Yahoo! Finance, MSN Money, Kiplinger’s Personal Finance and Seeking Alpha.