Nothing is more exciting than opening a shared bank account with someone, and nothing is more depressing than being stuck with the responsibility of handling a financial mess that wasn't of your own making. There are pro's and con's to opening an account with someone (as there are to everything), so we've listed a few things you should consider before making that big step.
A joint bank account is an account that belongs to two (or sometimes more) individuals. You can both make deposits and withdrawals and you both have equal responsibility for the money in the account, as well as the money that is promised (in bills or cheques) from that account.
Moving into a shared house, or moving in with a partner, is usually a time when opening a joint bank account seems like a good idea. Shared responsibility for bills and rent, as well as other household costs means this is an easy way to both contribute with minimal fuss.
Before you do though, do your research on not only the accounts that offer you the best deals, but also the ones that are the easiest to close down and offer you the most protection.
Things to watch out for when opening a joint account are:
You are both liable for the money in that account. This means that if the account goes overdrawn, you are just as liable for repaying the debt, even if it wasn’t you who went overdrawn in the first place. This may have a knock on effect on your credit rating.
If the other person decides to withdraw all your money from the joint account and move to Mexico, in reality there is very little (if anything) you can do get that money back.
Be very sure of your access and withdrawal rights. Whilst in theory it may sound good to have all withdrawals certified by both signatures, as it offers you extra protection, it doesn’t always work out to be the most practical solution. It is more longwinded, and if for any reason your account co-owner cannot or will not sign on a withdrawal, then you are stuck with no access to money that is rightfully yours.
Know the person you are opening an account with. This may sound ridiculous, as you will be likely pretty close to them already if you are thinking of opening an account. However, do you really know them? Have you talked about difficult subjects like outstanding debt, credit history, spending habits and patterns, even gambling problems? Anything that could end up coming back and damaging you. Remember that as soon as you open that account you are liable for all of the money, transactions, debt; everything. Make sure you know the co-owner and what you're getting yourself into.
If and when you decide to go your separate ways then make sure you close down that account. Leaving an account with your name on it just open and floating around in the ether is not responsible or financially smart. Especially if there is someone else who can gain access to it and use it irresponsibly. Again, this is something to think about before opening one up. Most joint accounts need both of you to sign off on closure. If you have fallen out with the other person or they have disappeared never to be seen again, then you are stuck in a vulnerable situation; financially attached to an account you cannot close and at the mercy or someone who doesn’t necessarily have your best interests at heart any more.
This sounds morbid, but look into what happens in the event of your co-owners death. Most accounts should automatically transfer over to the survivors name, however there could be a case for that account being frozen indefinitely with you having no access to your funds. This is something to ask your representative when you go to open the account.
On the whole, if you open a joint bank account with someone responsible whom you trust, then it makes life in shared accommodation (whether with friends or partners) that much easier.
It’s just not something that should be entered into without a little thought and research.