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Joint bank accounts can be useful for married couples, long term domestic partners, families and even roommates to make their budgeting and sharing bills easier to manage.
Let us have a look at what a joint bank account is.
Well, a joint bank account is like any other bank account you open with your bank or credit union. The only difference is that it lets multiple people to act as the account holder. All of the account holders can deposit and withdraw funds and will be held equally responsible for overdraft fees.
You can use it to save money, earn interests, swipe a debit card to make payment, set it up for direct deposit, automatically pay bills and also write checks. The number of allowed holders for a joint bank account is typically two though some banks also allow up to four users.
How can a joint Bank account be right for you?
The answer to this question depends on many factors. So, you need to learn the few factors to know why it can be right for you.
- The main reason why people open a bank account is because they are married or partners with shared expenses and saving goals.
- It can make you more disciplined towards your own spending.
- It can also help you to form a team mentality towards saving for any particular goal you have set and in turn achieving it with your partner.
- Sometimes parents will add children just to make them learn the ropes of money management.
- If you trust your roommate enough to open a joint account for rent and utilities contributions, it is an easy way to take care of shared household expenses.
- The most profitable aspect of joint bank account is the financial power of combined money. Many banks will pay a higher interest rates when you have more money in them.
So, these were the few factors which tells how a joint bank account is right for you but there are pitfalls too. Lets get known to them –
Pitfalls of a joint bank account –
Joint bank accounts have a lot of downsides too. So, open a joint account with the person you are thinking of only after making sure that you trust you co-owner on both personal and financial level.
Some of these cons are listed below –
- If the friendship or relationship ends poorly then the other co-account owner can drain the account before you are able to freeze the funds or withdraw your share yourself.
- If you do not see eye to eye spending or saving with your partner then considering separate accounts would be useful to avoid fights.
- You would have no say if the co-owner mismanages the funds. Though they may be solely responsible for overspending, the bank will hold both of you responsible for resulting overdraft fees.
- If the co-owner has a bad credit score, it can also have a negative impact on your own credit score.
- Joint bank accounts can get messy if one of the owners passes away. The other owner gets all the money even if the one who died intended to distribute some of it to other family, friends or other organizations via his will.
How to open a joint bank account?
After reading all the above-mentioned pros and cons for opening a joint bank account, if you are still intending to open one with your partner, here are the steps as to what you need for opening a joint bank account.
Apply online or visit a bank in person to open the account. The process is typically easy. Just make sure that you take with you-
- Proof of identity like your passport, driving license.
- Proof of your address,like an utility bill.
- Your initial deposite.
After submitting the proof of your identity ,you will need to fill out a form and you are good to go. You would receive a debit card,a check book and information regarding how the account works.