A joint account is a type of current account where two people (or more) can access funds as you would with an ordinary current account to help share expenses or bills. They are a great way of managing shared costs and expenses. Most commonly, couples or people living together will contribute some of their salaries to the joint account from where shared costs such as mortgages, rent, utilities or groceries will be covered from.
How do they work
They operate very much like any other bank account, whereas multiple people are named as account holders. Most will be set up so any of the account holders can withdraw funds and carry out normal banking activities such as setting up direct debits or standing orders, depositing and withdrawing cash. However, some may require permission (or bank mandate) of just one person, both or all account holders.
They come with the same charges as sole accounts such as failed direct debits, overdraft charges or annual/monthly fees. If you manage the account carefully, you should be able to use it for free.
How to open a joint account
Opening a joint account is very much the same process as opening an account for a single person. Each applicant of the account will have to complete the appropriate paperwork including proof of ID and address.
If one or more account holders have a poor credit score, some banks and building societies offer a joint basic bank account.
How best to run the account
With a shared account, it’s good practise to have some ground rules for everyone using the account.
- Budget. Plan each month how much needs to be deposited by the account holders to cover the joint expenses. As part of the budget, make it clear was expenses the account is to be used for such as rent, utilities and groceries.
- Set up regular payments. Once you know how much you will need in the account, you will need to decide how much each person will contribute into the account and when. To help forgotten payments, set up a standing order on a regular basis.
- Communicate. Make sure you speak to each other when purchases are made, funds are low, there are exceptional expenses that need to be covered, etc. Even after budgeting, make sure you regularly review the account to ensure there are sufficient funds.
Will it affect my credit score
Whilst opening a joint account will not have a negative impact itself on your credit score, you will need to be careful if one of you already has a poor credit score.
By opening up a joint account, it will effectively link their financial history to yours. Even if you have an excellent credit score, by sharing a joint account with someone who has a poorer credit score can bring yours down. They can still show on your credit record after you close the account.
When is a joint account not a good idea
A joint account is a serious financial commitment for all account holders and should not be entered into lightly. As previously noted, a joint account will link your credit history and score with the other account holders. It will influence your ability to access credit now and in the future. Therefore, all parties must be happy that the relationship will last and can trust them. If there are issues around poor money management by other parties, all account holders are equally liable for any monies owed even if debts were run by the other party.
Closing a joint account
This is a relatively straight forward process, unless there is a dispute with regards to how to split the current balance of funds. If this can be agreed, the bank will simply ask for signed permission from all parties before closing the account. If an overdraft was taken out, this will need to be repaid in full prior to closure.
Legal rules for a joint account
If there is a dispute, then one or both account holders can ask the bank to freeze the account until a settlement is reached, either between the parties or by a court. This means that all cheque books and debit cards will be blocked and further payments by direct debits and standing orders will also be refused.
Funds in a joint account that are not ‘both to sign’ are legally accessible by either party. That’s why it’s important to think carefully before opening a joint account that is not ‘both to sign’.
What happens if one account holder is mentally unfit?
If a joint account holder is judged to be mentally unfit to manage their own financial affairs, a power of attorney must be provided to banks in England or Wales. Banks in Scotland can allow other account holders to carry on operating the joint account under the Incapacity (Scotland) Act 2000, so long as the account was set up on an either to sign basis. Banks in Northern Ireland all have separate practices on how they handle this.
What happens if one account holder dies?
In the event of the death of one of the account holders, the bank will request a copy of the death certificate then transfer the account into the sole name of the surviving partner.
In all cases, any monies owed – such as an overdraft – must be repaid in full before an account can be closed.
If the account is being closed due to the breakdown of a relationship, you should make sure that credit reference agencies also separate your credit rating from that of your ex-partner.
| Pros | Cons |
| Makes shared expense simpler. Many couples use joint accounts to cover their bills | Either party can spend the funds without authorisation if they have dual authority |
| Joint authority means that one account holder can easily undertake changes, withdrawals, make deposits or pay bills without the need to get signed authority from anyone else | Parties are equally liable for overdrafts – even if they did not run-up the debt. |
| Depending on how much each person puts in, joint accounts can make the paying of shared expenses or costs fairer and more equal | Risk of money being tied up for long periods if the relationship breaks down or a dispute arises. |
| Could improve your credit score | The behaviour of your shared account holder(s) could decrease your credit score through no fault of your own |
