Everything You Need to Know About Joint Accounts
If you have been with your partner for a significant amount of time or live with housemates, you may consider opening a joint account. We have compiled a short guide to help you understand exactly what a joint account is, what it entails and things to be aware of before you decide to go down that route.
What is a joint account?
A joint bank account is an account that multiple people share and are able to make and view transactions, hold a bank card for and pay money into. They are usually used for managing shared finances, like rent, bills or a mortgage in situations like a couple living together or housemates sharing a home.
Things to be aware of in advance
Before you open a joint account with someone, there are a few things to take into consideration:
- The person or people you share the account with have the same right to the money in the account as you do
- Creating a joint account with someone creates an association with the other account holder(s) in your credit report, which means that if they have a poor credit rating, yours may suffer as a result
- If the account gets overdrawn because another account holder has mismanaged the account, all account holders are liable for this
This kind of account functions similarly to a personal account and banks usually only allow two people to share. However, some do allow up to four people which works better for housemates and those living with multiple others.
With a joint account, you are able to set up direct debits and standing orders and each account holder will have a debit card for the account. As we mentioned before, all account holders can view transactions, making it clear where money is being spent and paid in.
How to open a joint account
You can apply in branch or online, depending on what you prefer. Each account holder will need to:
- Complete an application form with their personal details.
- Provide proof of address, such as an utility bill or other bank statement.
- Provide proof of identity, such as a passport or driver’s licence.
You will be required to sign a mandate when you open the account, which sets out how the account is run and outlines your responsibility over the account. Pay particular attention to the overdraft, as any party has the ability to go over into this making all account holders liable.
How to divide a joint bank account
According to MoneySuperMarket*, ‘The courts look at joint bank accounts differently depending on your relationship with the other account holders and where you live. If you live in England or Wales and have a joint account with your spouse or civil partner, the money will be split equally, even if one of you never paid in a penny. But if you share your joint account with anyone else, perhaps a sibling or a group of friends, the cash will be divided up according to the amount you contributed.’
Joint accounts are covered by the Financial Services Compensation Scheme (FSCS), which, from 16 January 2017, guarantees savings up to £85,000, or £170,000 for a couple, for each authorised bank or building society.
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.
*Please be advised by clicking this link you are leaving the gpfm financial planners page.
gpfm are an independent financial planning company dedicated to the provision of personal, professional and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.