What are the Pros and Cons of a joint bank account?

Opening a joint bank account is a big step in any relationship. Whether you're considering a joint bank account with a housemate or your significant other, it's a move that comes with significant consequences. It's not simply a case of pooling your money together to pay bills more effectively. Still, according to a Legal and General survey, 2 in 3 cohabiting couples have a joint bank account, and 45% of those surveyed said they felt less stressed about money after deciding to share their finances with their partner. So, let's take a look at how joint bank accounts work, the implications of having one, and whether it's right for you and your finances.

What is a joint bank account?

A joint bank account is designed for people who want to manage their finances together. This type of account is typically shared by two or more people. They are equally responsible for all the money in the account and can do things like:

• Set up direct debits and standing orders to pay bills
• Use the overdraft facility
• Have their wages or pensions paid into the account
• Withdraw cash or make payments with their own debit card

Each person will receive a debit card and account details to access services like online banking and manage the account. You can generally open two types of joint bank accounts: joint current accounts and joint savings accounts. We take a look at both options below.

Joint current account

Joint current accounts are designed to help people manage their money together. You don't have to live together or be married to have a joint current account. You may choose to open one so you can pay joint bills more easily, for example. Joint current accounts also have other benefits, but require a high level of trust between both account holders.

Joint savings account

A joint savings account works in a similar way to a standard savings account. You put money away and earn interest on it. The key difference is that both you and the other account holders can add or withdraw money from a joint savings account. These accounts are designed to help you and the other account holders save towards a common goal or earn interest on a bigger pot of savings. Some joint savings accounts are instant access, while others require you to lock your funds away for a set period to earn interest. There are typically fewer joint savings accounts on the market, but some come with better interest rates on higher balances. If you want to find out more, read our article on the best joint savings accounts available right now.

The pros of joint bank accounts

Opening a joint bank account is a significant financial decision that can help you manage household bills more effectively. Below we take a look at some of the benefits of this type of account.

You can manage your joint bills more effectively

Having a joint bank account might make sense for you if you live together. You may already share most of your expenses anyway. From rent, mortgage payments, bills, food shops, to socialising,  pooling your income is a great way to manage bills more efficiently. It may save arguments over who is responsible for which bills, and whose turn it is to do the food shop, for example.

You get higher FSCS protection limits

If you have a joint bank account, you get double the Financial Services Compensation Scheme (FSCS) protection. Typically, the FSCS protects your funds up to £85,000 per person per bank. If you open a joint account with your partner, your funds are protected up to £170,000.

You can still have your own bank account

Having a joint account doesn't mean you need to share all of your income with your partner or housemate. In some cases, this might not be the best option for you. The good news is that you can both still have your own bank accounts if you choose to do so. You could, for instance, have your salaries paid into your own accounts, and transfer a portion of your income to the joint account to cover your share of the bills. Some people are more comfortable with this option, as it means they still get to keep some of their own money and spend it at their discretion. At the same time, they get the benefit of managing joint bills more effectively.

You get immediate access to the money in case of death

If your partner dies and you don't have a joint account, you don't get instant access to their money. This is the case even if you're married. It's likely that their account will be frozen and you'll need to go through probate before you can access their funds. This makes things complicated, particularly if a large chunk of the bills were paid by the deceased person. A joint bank account works differently. The surviving partner remains in control of the account and can have the funds transferred to them right away under the rule of survivorship. Joint bank accounts also typically fall outside of the deceased partner's will. However, it's worth remembering that unless the joint account was shared between spouses, inheritance tax may apply in certain circumstances. This rule makes joint bank accounts a great option for couples who share household expenses, for example.

The cons of joint bank accounts

Joint bank accounts aren't right for everyone. Let's take a look at some of the disadvantages of this type of bank account.

Your credit files will be linked

When you open a joint bank account with someone, you will become financially associated with them. This means if your partner has a poor credit history, you might struggle to get approved for loans or other products in the future, as credit checks will include both your credit histories. On the flip side, if you both have good credit scores, a joint bank account could improve your score. So while we've listed this as a con, there are some cases where it can actually work in your favour, particularly where you and your partner have similar financial circumstances and outlooks. It's also worth remembering that your credit files may already be linked; for example, if you have a joint mortgage.

You will be responsible for all debt

You will be jointly responsible for paying off debt accrued on the account, such as overdrafts. Any fees associated with paying off the overdraft will also be a joint responsibility. This is why it's so important that you're both on the same page financially. If your partner is happy to live in their overdraft and doesn't mind racking up overdraft charges and fees, but you take a more frugal approach to spending, your different outlooks on money could cause some friction. This can be mitigated by having open and honest conversations about how you plan to use the account and what works for both of you.

The other person could withdraw all your money

Any money in a joint bank account belongs to everyone named on the account. It doesn't matter if you've put in £25,000 while your partner only put in £2,000; both of you jointly own all funds. To put it bluntly, this means your friend or partner could withdraw all the money in the account and walk off with it if they decide to do so. There may be ways to get a portion of your money back via the courts, especially during divorce proceedings, for example, however, this will be a long and costly process. If the relationship doesn't work out, you can take action to protect your funds. You could, for example, request that the bank freeze the account. Many banks will do this without requiring permission from both parties. But you will both need to agree to "unfreeze" it. If you go down that route, you may need to make alternative arrangements to ensure bills and mortgage payments go out as scheduled. This is a significant drawback of a joint account arrangement. 

Untangling your finances can become more complex

If your relationship ends, it may require a little more administration to settle your financial arrangements when you've had a joint account. For instance, in order to close a joint bank account, both account holders have to agree, typically in writing. Whether you freeze or close the account, you'll need to make changes like:

• Having your salary paid into your own account moving forward
• Making sure bills continue to be paid
• Cancelling direct debits and standing orders
• Paying any remaining overdraft balances and charges

Some of these changes can cause disagreements so it may be worth discussing what happens if you separate before you open a joint bank account. If you have a plan beforehand, you're less likely to act on impulse if the relationship falls apart.

How to open a joint bank account

You can usually open a joint bank account online or in your chosen bank's local branch. You'll typically both need to be over 18, and you may need to provide ID and proof of address. Some banks ask for two forms of ID. Depending on the product you choose, some examples of documents that may be requested to process your application include:

• UK or EEA driving licence
• Passport
• Council tax bill (for proof of address)
• Bank statement (for proof of address)
• Utilities bill (for proof of address)

Applying is often as simple as filling out a quick form. However, in some cases, such as if you're planning on having more than two account holders, you'll need to go to the branch to discuss your options. All account holders will also usually need to go through a credit check before the application can be processed. The application could be rejected if one of you has a poor credit history.

Is a joint bank account right for you?

A joint bank account can be a great way to share bills effectively or earn interest on a savings account. It also ensures that, in the event of death, the surviving partner can continue having access to the money in the account without having to go through probate. But, this type of account isn't right for everyone. If you and your partner are not on the same page financially and have different approaches to money, a joint bank account can be the source of arguments. It might not work well if you're in a short-term living arrangement with a housemate, either. Closing a joint bank account can, at the very least, add another task to tick off the seemingly endless list of admin tasks. If you choose to open a joint bank account, make sure you trust the person you're planning on sharing your money with. It's also a good idea to have an open and honest discussion about your financial histories and how you plan on using your joint account. If you're set on opening a joint bank account, check out the best current account switching offers here. Many of these offer joint account options.