What is a joint bank account and how do I open one?

A checking or savings account owned by two or more people is a joint bank account. Each owner can use the money in the account as if it were theirs alone.

Zack Sigel

Zack Sigel

Published November 18, 2019

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A checking or savings account owned by two or more people is considered a joint bank account. Each owner of the account can deposit or use all the money in the account as if it were his or hers alone.

Many people open a joint bank account with their spouse. Joint bank accounts are a convenient way to pay the bills, make mortgage or auto loan payments, or to save for a vacation together. Since you can see all the charges your partner makes, joint bank accounts can even help build trust in a relationship.

You can also open a joint bank account for your child’s or elderly parent’s expenses. While most banks allow only two people to own one deposit account, others may allow up to four.

Each owner is equally responsible for everything that happens in the account. That includes paying not only fees, like nonsufficient funds fees or minimum balance fees, but also court judgments and tax liens. There is little recourse if one of the owners drains the joint account, so make sure you’re confident in the other party’s financial discipline before opening one.

Read on:

Joint bank accounts with your spouse or partner

Your spouse or partner needs to go with you to the bank location to set up the joint account. If you’re using an online bank — which could have much higher interest rates for both checking and savings accounts — your partner should sit with you while you sign up.

That’s because, whether at a brick-and-mortar location or online, both owners will need to submit all their information, including a photo ID. Both you and your partner can also choose to set up direct deposit at that time.

Virtually every bank and credit union offers joint bank accounts, including major mainstays like Chase Bank, Bank of America, and Wells Fargo. Online banks and other savings platforms like Ally and Betterment almost always offer joint bank accounts, too.

But every couple has different needs, and there’s no single way to manage your finances in a relationship. Make sure you discuss opening a joint account with your partner and the benefits and risks that could come with it.

Note that opening or closing a joint bank account doesn’t affect your credit in any way. However, if one co-owner overdrafts the account and doesn’t replenish the money, the missing funds could go into collections, and that will affect the credit of all owners on the account.

Pros

  • Opening a joint bank account is convenient. You’ll see all your finances in one place, and you can pay expenses like insurance premiums, utility bills, and loan debt from one account.

  • Combining finances grows interest faster. Double the wages going into one account means double the returns if the account is interest-bearing. This can help you save for a home or build a rainy-day fund.

  • Joint bank accounts help keep couples honest with each other. If you’ve ever wondered what your partner blows all their hard-earned cash on, a joint bank account can give you a peek into their finances.

  • You can still keep personal accounts for your own needs or for surprise purchases like gifts. Some couple just wants to know that there’s enough money in the joint account to cover the bills and not that the other partner just bought 100 new video games or shoes or whatever their vice is.

Want to grow your money even faster? Use Fiona to compare interest rates for savings accounts online.

Cons

  • You’re responsible if your partner is bad with money. If your partner frequently overdrafts the account, both of you will have to pay the resulting fees. If your partner spends all the money in the account and doesn’t replace it, you have virtually no way of getting it back.

  • If you or your spouse earn different levels of income, finding a way to equitably contribute to the joint deposit account could be challenging. (Some couples contribute proportionally instead of as a flat dollar amount.)

  • If one partner steals the funds and flees, it makes little difference whether you were married or not. For that reason, many couples use their joint accounts only for shared expenses and keep personal accounts for everything else.

Joint bank accounts with your child

If your child is still a minor but old enough to work, they’re eligible to open a checking or savings account on their own so they can deposit their earnings. However, the account will have to be a joint account with one parent or guardian as the co-owner.

As with opening a joint bank account with your spouse or partner, your child will have to be present. Sometimes, the child will have to provide evidence that they are enrolled in school. Additionally, the joint account may have to be linked to the parent’s personal checking account.

Opening a joint bank account with your child is a great way to teach him or her about spending and saving money. But they’re not always the best idea, especially when your child is no longer a minor. (To remove yourself or your child from the joint bank account, you both need to be present.)

Pros

  • Joint bank accounts improve financial literacy, which many kids don’t pick up until they’re abruptly thrust into the real world.

  • You can start a small savings for your child and he or she can watch it grow.

  • The account is a convenient way to transfer money to your child, such as providing an allowance, giving a gift, or making sure he or she has spending money when out with friends.

Cons

  • When the child grows older, he or she may take on financial liabilities that come with adulthood. Any debts or liens can be garnished from the account even if you’re still a co-owner.

Joint bank accounts with your elderly parents

You can set up a joint bank account with your elderly parents just like for your child. You may want to cover their end-of-life expenses or pay their bills so they can stay in their home, or maybe just monitor their expenses if their mind isn’t as sharp as it used to be.

Some of the same risks still apply, however.

  • Adding owners to an already existing account — whether parents adding their children or an adult adding their parents — could result in the new owner paying gift taxes if he or she withdraws more than the gift tax exclusion ($15,000 as of 2019).

  • Adding your parent to your account could affect his or her eligibility for Medicaid and other income-limited social benefits if the funds in your account push him or her over the threshold.

  • If your elderly parent adds you to their bank account and grants you rights of survivorship, then all the funds in the account will automatically become yours when he or she dies, effectively cutting out your siblings and other loved ones from your parents’ estate, even your parent had a will and testament stating otherwise

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Joint individual retirement accounts (IRAs)

An individual retirement account, or IRA, helps people put away money for their retirement by investing it in securities like stocks and bonds. Those assets increase in value over time and can be sold.

Two of the most common types of IRA, the traditional IRA and the Roth IRA, both support joint accounts for married couples. To open a spousal IRA, talk to the investment firm that manages your funds.

As with a joint bank account, spousal IRAs let both partners contribute and withdraw funds. Although the annual contribution limit is the same as those for individuals a spousal IRA can help both both partners pool their money to buy expensive securities. In the years 2019 and 2020, the maximum yearly contribution is $6,000, unless you're 50 years old, in which case it is $7,000.

Before opening a spousal IRA, you should trust your spouse’s financial sense. Keep the following in mind when opening a joint IRA:

  • Make sure you agree on which securities to invest in, as not all securities are created equal
  • Neither partner should withdraw from an IRA without the consideration of the other partner, as early withdrawals can have serious tax implications and result in fees

If you don’t want to add your spouse as a co-owner on your IRA, you can make them the primary beneficiary of your account, so if you die they will receive ownership of the funds. Additionally, both partners can have their own IRA, each with its own annual contribution limit, without triggering any tax penalties.

Closing a joint bank account

To close a joint bank account at a brick-and-mortar bank, all owners need to be present and give their consent. They may need to present some form of photo ID. For online-only banks, the other parties may need to prove who they are by logging in with their own username and password.

As with switching banks generally, each owner of the joint account should withdraw his or her share of the funds, then close the account as soon as possible to avoid low-balance fees.

If you don’t withdraw your funds prior to closing, the bank may issue a single check made out to all the owners on the joint account, which other banks may refuse to accept unless the money is going into a new joint account owned by all the people listed on the check.

Make sure automatic or recurring payments are rerouted to your new bank account before closing the old one. If a business or organization tries to debit your joint bank account after it has been closed, the charge will be rejected, and they may charge you a bounced-check fee the next time you attempt to pay.

If one of the co-owners has died, then the other owner needs to present a death certificate to close the account. In the case of a divorce, when the other party is unreachable, a court may have to step in and decide whether the account can be closed without the other party’s consent.

Learn more about how to close a bank account.

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