Joint accounts: good, bad and sometimes ugly

Joint accounts are a useful tool for those who have joint bills and financial responsibilities to be able to manage them quickly and easily. They are particularly useful and mainly used by couples and housemates as a convenient method to share expenses and money.

Although joint accounts have many benefits, there are some which do not view them favourably as they feel that they can be a big risk with your own finances. Though there are some safeguards in place entering into a joint account is a commitment and if you are unsure whether you can trust the person you will have the joint account with, it is worth withholding from opening the account.

What is it?

A joint account can be used by two or more people who can pay money into the account, write cheques, withdraw money and pay bills. Couples who live together, married or not, and housemates are the ones who usually find a joint account to be the most beneficial for them.

It is simple to open a joint account, most banks and building societies offer them and they can usually be opened online or in branch dependent on the provider. The information you would need to open a joint account include name, date of birth, proof of ID and proof of address.

The benefits

There are many benefits of joint accounts and as a result they work well for most people that set one up.

• They are a simple way to share money and manage household expenses such as bills, rent and mortgage.
• They can help to prevent arguments surrounding money for some couples as the guidelines they set out between themselves for managing the account can really help them.
• It can make budgeting for your financial commitments or for future events, such as a wedding or holiday, easier as you both know how much money you have.
• Any money left in the account at the end of the month, after bills have been paid, can be used in whichever way you both decide whether you save it or spend it on a treat is up to you.
• The best way to have a successful joint account is to be open and honest with your partner or housemate especially when it comes to money.

The downsides

However, there are many reasons why a joint account may not be right for you or it may not work for you and your partner/housemate. Some of the downsides of a joint account could include:

• You will lose a little piece of your privacy where your money is concerned. The account holders can see all transactions that take place which is why many people keep a personal current account separate to their joint account for any personal transactions that need to be made.
• There is not much you can do if one account holder takes money out of the account without your permission as you have both signed the account agreement so you both have access and entitlement to the funds.
• It may not be a good idea for you to open a joint account with someone who has a poor credit history. This is because once you have a joint account together you will be co-scored on any searches by lenders and credit reference agencies which means your credit score can be affected as well. However, this is not an issue if you live together or are married but don’t have a joint account together.
• All account holders are responsible for an overdrawn balance even if you were not the person who put the account in the red in the first place. If you are not willing to become liable for another person’s debt, then a joint account may not be advisable for you.

How to protect yourself in case it gets ugly

In most cases, sharing a joint account with someone is an amicable experience however there are occasions when things start to turn sour, especially if a breakdown in a relationship comes along with it.

There are ways that you can deal with this though and you can protect yourself initially when you open the account. Ask your bank/building society about how to handle disagreements or the end of a relationship when you are applying for the account.

They are likely to suggest a formal agreement called a ‘mandate’ or ‘authority’ which all account holders should sign when opening the account. If you have problems with your fellow account holders, you can cancel the mandate but keep in mind that the other parties named on the account can also cancel the mandate.

This will freeze the account so no-one, including yourself, can access or withdraw money and the account will only be unlocked once all account holders agree how to split the money. However, if you cannot reach an agreement, it is likely the dispute will go to the courts for them to decide what to do with the money.

Credit cards

A joint credit card doesn’t technically exist, however if you and your partner are wanting to share a credit card there is a way you can do this. You or your partner can up a credit card account and request another card for the account which can be used by someone else. However, as credit card accounts can only exist in one name, if you open the account you are responsible for the balance, repayments and any debts.

As a result, sharing a credit card account with someone is not a good idea if you do not trust them with money as you have less protection personally and if your name is on the account, you are completely liable for the account regardless of who spends the money in the account.

If you are thinking about opening a joint account or you are worried about the account you already hold with someone else, you should get in touch with your bank, building society or Citizens Advice.

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