A joint bank account may be a convenient way to manage shared expenses and finances, but it's important to understand the process and potential implications.
Key Takeaways:
- Joint bank accounts allow multiple people to manage shared expenses and access funds from the same account.
- These accounts may be helpful for couples, caregivers, and parents teaching teens financial responsibility.
- Both parties have shared responsibility for the account, so it’s important to trust a joint account holder and set clear expectations.
- Adding a co-owner or authorized user typically requires personal identification and, in some cases, an in-person visit.
- Before closing or modifying a joint account, review the terms carefully, especially if a co-owner has died.
A joint bank account is a popular solution for couples or other groups who need to deposit and withdraw money to and from the same account.
However, when more than one person has access to the same bank account, maintaining clear communication and expectations about the use of the account and the money kept in it is critical.
This guide to joint bank accounts covers what a joint bank account is, its advantages and disadvantages, and how to open one.
What Is a Joint Bank Account?
A joint bank account is a checking or savings account that is owned and controlled by two or more people (Your bank may limit how many owners a joint account can have). Any of the account's owners can make deposits into and withdrawals from the account.
In many cases, everyone included in a joint checking account receives a debit card to make purchases and access the account through an automated teller machine (ATM). Similarly, all owners have access to checks.
When you are a co-owner of a joint bank account, you don't need the consent of the other owners to conduct any transactions using funds from the account.
Who Can Benefit From Opening a Joint Bank Account?
Here are a few scenarios in which having a joint bank account can be beneficial.
Couples
Traditionally, joint bank accounts have been the domain of married couples. However, in recent decades, unmarried couples in committed relationships have also benefited from having equal access to a joint bank account. A joint account makes it easy to cover shared financial responsibilities such as paying housing costs, utility bills, and grocery purchases.
Teenagers and Their Parents
Joint bank accounts are also helpful for teaching a teenager about money management. With a joint bank account, a teen can make purchases and deposits on their own. However, it also allows you to keep tabs on the account balance and transactions. In addition, you can also transfer money from a linked account if your teen needs extra funds. Learn More About Opening a PNC Student Account
Elderly Adults and Their Caregivers
Joint bank accounts are also helpful for elderly parents and their adult children or other trusted caregivers. In this situation, not only does a joint bank account allow caregivers to help aging parents with their finances but, in case of an emergency, an adult child can access the money in the parent's account. Adult children can also keep tabs on the account balance to protect against fraudulent activity. This benefit is especially important, given how financial crimes against the elderly are on the rise[1].
However, whoever you decide to share a joint bank account with, it's critical that you completely trust the other person and can maintain clear, efficient communication about the account and the money within it.
One partner's poor money management skills can quickly become the other's financial problem when you both share a bank account.
Keep in mind that you can still keep a separate individual bank account in addition to a joint account. Many committed couples maintain separate accounts for personal use and a joint account for shared household expenses. If you and your partner decide to keep multiple accounts, discuss expectations for contributing and withdrawing to and from the joint bank account. For example, are both partners contributing identical amounts of money to the joint account every month?
Pros & Cons of a Joint Bank Account
As with all things, there are both positive and negative aspects of opening a joint bank account. Let's look at some of the major pros and cons of opening and operating a joint bank account.
Pros of a Joint Bank Account
- Joint bank accounts make it easy for more than one person to contribute to shared expenses, such as mortgage or rent payments, car payments, utility bills, etc.
- They also allow partners to save toward a shared financial goal, such as a much-needed vacation or the down payment on a new house.
- Using a joint account increases financial accountability, potentially making it easier to stick to a budget by discouraging "secret" and unnecessary purchases.
- Joint bank accounts can allow adults to keep tabs on their teenagers' spending and help them create healthy habits — as well as have a convenient way to transfer funds from their own accounts when necessary.
- Joint bank accounts can prove valuable to adult children helping elderly parents manage their money.
- The Federal Deposit Insurance Corporation (FDIC) insures every account holder individually up to $250,000[2]. So, if there are two owners of a joint bank account, the total FDIC coverage would be $500,000.
Cons of a Joint Bank Account
- If one of the account holders is careless with money, creditors such as credit card companies and the IRS may take money from the joint account to cover any debt owed.
- A lack of cooperation and communication regarding the joint bank account can create stress and conflict in a relationship.
- All account owners are responsible for overdraft fees and other charges.
- Because all account owners can access the account, there's a lack of financial privacy and independence.
- If you and your partner end the relationship, you will need to close the bank account and divide the funds between you.
Of course, the decision of whether or not to open a joint bank account ultimately lies with you and your partner, parent, or teenager.
Here's How To Open a Joint Bank Account
The process for opening a joint bank account is similar to opening an individual account. However, during the application process, you specify that you're opening a joint account. You will need to provide your bank with information for all of the owners listed on the new bank account, including:
- Your full names (as appearing on a government-issued photo ID)
- Your Social Security numbers
- Your mailing addresses
- Your phone numbers
- Your dates of birth
All applicants will likely need to be present if you're opening a new joint account in person. Make certain everyone brings along their government-issued photo IDs.
If you're applying for the account online, you won't all need to be physically present. However, you will need to upload images of all account holders' photo IDs.
Many banks will also allow you to add a co-owner to an already existing individual bank account. Typically, you will need to do this in person rather than online.
Learn more about PNC’s joint checking account options
Adding an Authorized User to an Existing Account
Some banks allow account holders to add another person to an existing account. This option may be convenient when one person already has an account and wants to grant full access to someone else. Adding another authorized user effectively turns the account into a joint account.
Adding someone to an existing account may simplify financial tasks, but it also means shared access and responsibility. This change typically gives the new person the same rights as the original account holder, including the ability to:
- Make deposits and withdrawals
- Write checks
- Access the account via debit card or online banking
Since both parties share responsibility for the account, it's important to make this decision with care. Be sure to discuss expectations and account use before making the change.
At PNC Bank, both the current account holder and the person being added must visit a branch in person to complete this process. Be sure to bring valid, government-issued photo identification and any other documentation required by the bank. You may contact your local PNC branch ahead of time to confirm what you'll need.
How To Close a Joint Bank Account
There may come a time when you may want to close a joint bank account due to the dissolution of a relationship, a death, a decision to change banks, or any number of other reasons.
Banks have different rules about who can close a joint account. Some allow one account holder to unilaterally make that decision. However, others require the consent of all living account holders before the joint account can be closed. Check with your bank to make sure you understand its account closure policies.
It is always a good practice never to close one bank account without first having another into which you can transfer funds. Before closing your joint account, make sure all the money has been withdrawn or moved to a different account.
What Happens if a Joint Account Holder Dies
If one of the account holders dies, the next steps typically depend on how the account was originally structured. Some account agreements may allow the surviving owner to retain access, while others may direct a portion of the funds to the deceased person’s estate.
The Bottom Line
Joint bank accounts can be helpful if more than one partner shares the financial responsibilities of a household. They are also popular among adult children caring for aging or ill parents. By having a joint account, caregivers can help parents pay for medical or other expenses, as well as prevent fraudulent activity. Joint accounts can also benefit parents who want their teenagers to learn good money management habits.
However, before opening a joint bank account with anyone, make sure you trust the co-owner completely. Keeping the lines of communication open regarding the use of the account and the funds kept inside is also critical.
When used responsibly, a joint bank account can help strengthen a relationship and make sure the bills get paid.
