What to Know About Joint Bank Accounts

ELIZABETH S. | July 16, 2024

When people enter into relationships, whether personal or professional, they tend to combine many of their assets. For example, when two professionals start a business together, they partner on the location, the business plan, and financial assets. When two people marry, they typically combine their homes into one and tie together their financial assets. In both examples, this might mean opening up a joint bank account. 

But, managing a bank account comes with some serious responsibility. You need to make sure you have adequate funds in the bank to pay your bills. Good financial practices can result in a higher credit score, necessary for your long-term financial plans. As such, joint bank accounts have a lot of benefits, but they come with many risks, too. 

Someone placing a pink piggy bank next to a blue one

What is a Joint Bank Account?

A joint bank account is a shared bank account that two or more individuals can use. It allows all the account holders to deposit and withdraw money, making it convenient for managing shared expenses like bills, rent, or savings goals. 

These accounts are popular among business partners, roommates, and couples who want to simplify financial management. However, everyone must trust each other since co-owners can access the funds. Here are the three primary types of joint bank accounts.

  • Joint Tenancy: Each person owns the account equally. If one person passes away, the remaining owner(s) automatically receive the deceased’s share.
  • Tenants in Common: Each person owns a specified percentage of the account. Unlike joint tenancy, the share does not automatically pass to other owners upon death.
  • Shared Access on Individual Checking/Savings: One person owns the account but grants access to another person. This allows both to use the account, but only the owner has legal rights to the funds.

Benefits of Joint Bank Accounts 

As we said above, joint bank accounts have plenty of pros and cons. Let’s start by reviewing the benefits and advantages.

  • Ease of Access: Multiple people can access the funds, making it easy for all account holders to handle financial needs without delays.
  • Simplified Money Management: Managing shared expenses becomes easier, as all related transactions can happen from one account.
  • Shared Financial Goals: Joint accounts are excellent for couples or business partners working towards common financial targets like saving for a home or funding a business.
  • Convenience in Emergencies: If one account holder cannot manage their finances due to illness or travel, the other can easily step in and handle necessary transactions.
  • Transparency in Spending: With a joint account, all transactions are visible to each account holder, which can help monitor spending and avoid financial disputes.
  • Simplified Budgeting: It's easier to budget when all expenses come out of the same account, helping account holders keep track of outgoing money and adjust spending habits as needed.

Risks of Joint Bank Accounts

It is also important to know the risks before agreeing to open a joint bank account with another person or business entity.

  • Loss of Individual Control: All account holders have equal access to the funds, which means you might lose control over the money you deposit.
  • Financial Dependence: There's a risk of becoming financially dependent on other account holders, which can be problematic if the relationship changes.
  • Exposure to Debt: You are liable for any overdrafts or debts incurred by any account holder, which could potentially affect your personal financial health.
  • Relationship Strain: Joint accounts can lead to conflicts and disagreements over spending habits and financial management.
  • Complicated Resolution in Breakups: Dividing the funds fairly can be complex and contentious if a personal or business relationship ends.
  • Legal Entanglements: In business, if the entity goes bankrupt or in personal relationships, like divorce, untangling joint finances can be legally complicated and stressful.

When businesses dissolve or go bankrupt, separating joint accounts can be fraught with legal challenges, often requiring intervention by legal professionals to ensure a fair division of assets. 

Similarly, in the event of a divorce, dividing joint bank account funds must be handled as part of the overall settlement, which can prolong the process and add to the emotional and financial stress involved.

A couple signing to create a joint bank account

Considerations Before Opening a Joint Account

Now that you know some of the benefits and risks to a joint bank account, let’s cover a few additional considerations. Thinking through all the angles before proceeding can help ensure that a joint account is a boon, not a burden.

  • Trust and Communication: The foundation of any joint account is mutual trust and open communication. To prevent misunderstandings and conflicts, all parties must be comfortable discussing their finances openly and honestly.
  • Financial Compatibility: All account holders must align their financial habits and goals. Discrepancies in spending habits or financial priorities can lead to significant issues later on.
  • Legal Implications: Understanding the legal responsibilities associated with a joint account is essential. Each account holder is responsible for contributing to the account and liable for any debts or obligations that arise from it.
  • Account Management: Decide how the account will be managed and monitored. Agreeing on who handles deposits, payments, and the regular statements review can streamline management and prevent disputes.

Need Funds to Carry You Over During a Joint Bank Account Disagreement?

While it’s unfortunate, disagreements and bad things do happen. And when your bank account is in jeopardy, it can be hard to make ends meet. Don’t put yourself in the situation of a missed payment that could hurt your credit score and damage your financial reputation. An installment loan or cash advance loan from Cash Store can help. 

Get started today by completing our prequalification application.

The content on this page provides general consumer information or tips. It is not financial advice or guidance. Each person’s circumstances are unique. The Cash Store may update this information periodically. This information may also include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs. 

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