Joint accounts explained: Are they a good idea?

At a glance

• Joint accounts allow two people (sometimes more) to operate a single bank account.
• These are often used by couples or small groups of people as a ‘bills account’, which shared expenses and bills can be paid out of.
• Opening a joint account with someone else could have a large impact on your individual credit rating – both good and bad.

Many people who have merged finances or share bills choose to open a joint bank account to keep things simple. But what is a joint account, and is it right for you? This guide will tell you everything you need to know.

What is a joint account?

Very simply, a joint account is a type of current account where two or sometimes more people can access funds, make deposits, pay bills and do all the things that are possible with any other bank account under a single name (you can also open a joint savings account with another person, but this guide will mainly focus on current accounts).

Joint accounts are typically used by couples, but can also be opened by friends, housemates and family members – anyone who shares finances or bills may want to consider opening this kind of account, and you don’t even need to be at the same address.

Joint accounts are available from nearly all banking providers and they’re normally opened by two people, but there are some providers which will allow more than this, so make sure to check the details of the account if this feature is a priority for you.

How does a joint account work?

Joint accounts work very much like any other current account, the main difference being that more than one person can be a named account holder. With a joint account you can carry out all the things you would normally expect, such as setting up direct debits or standing orders, depositing and withdrawing cash and even setting up an overdraft if you need one.

Most joint accounts are set up so that either of the named account holders can withdraw funds and carry out normal banking activities, and both will typically get a debit card too (some require the permission of both/all account holders, though this isn’t as common). Joint accounts also mean you’re financially linked to the other person, and their credit history will become tied to your own.

The fact that one person can effectively manage the account without the other’s consent is why this kind of arrangement should never be entered into lightly, as the other person could withdraw all the money from it should they wish, even if you’re the one who deposited it. Once deposited the money is legally owned by both parties, which means you’re both responsible for it – and you’re also jointly responsible for any overdraft that could result from poor management.

Why get a joint account?

Joint accounts can be a great way of managing shared costs and expenses. Very often, couples or people living together will both contribute a portion of their salary to the joint account from which shared expenses, such as mortgage repayments, rent, utility bills or groceries, can be paid.

It’s not just couples who might benefit from a joint account. Other examples could be housemates or family members who live together and share expenses.

However, it is important to remember that with a joint account you’ll be sacrificing some privacy, and it can potentially be risky if you don’t trust the other person implicitly. There’s also nothing to stop you from having your own account as well as a joint account – in many cases this is often preferred, with many people opting to keep their personal funds separate and only using the joint account for shared expenses.

When is a joint account a bad idea?

Opening a joint account with someone is a serious financial commitment for all concerned. It will tie you to the credit history and score of the other person, which will influence your ability to access credit, both now and in the future.

For this reason, both parties must be happy that the relationship between them is one that will last. In the event of a breakup, separation or divorce, joint accounts can make things even more tricky and financial separation even more complex.

Equally, you should be wary of opening a joint account with anyone who has poor money management skills. With a joint account, the commitments made by one party must be honoured by both account holders – in other words, you will be equally liable for any debts even if they were run up by your partner, so make sure you’re happy with that.

How to open a joint bank account

Opening a joint account is very much the same as opening an account for a single person, the difference being that each account holder will be asked to fill out the appropriate section of a shared application form and will need to individually provide proof of identity and address.

Documents you’ll likely need to provide include:

• Photo ID (passport or driving licence, for example)
• Proof of address (e.g. utility bill, council tax bill or bank statement)
• Proof of income/expenditure (if you’re applying for an overdraft)

Once opened you’ll both have access to the account and will be sent individual debit cards, and you’ll both be able to register for online/mobile banking as well. However, some accounts will let you restrict transactions so both parties have to approve each payment – think about whether this would be necessary for your situation.

Many current accounts and savings accounts can be opened by more than one account holder – head to our charts, click on “Full Search” and filter so you only see accounts that can be opened jointly.

Does a joint account affect your credit score?

While opening a new joint account itself will not have a detrimental effect on your credit score – though if you’re applying for an overdraft the credit check could result in a temporary blip, as it would for any other credit application – you should be careful if one of you has a poor credit history.

This is because you’ll become financially linked to that other person and will effectively be tied in to their creditworthiness, so while you might have an excellent credit score, if theirs is poor it can bring yours down too. This applies both when you open the account and if your partner runs into financial difficulties in the future.

The reverse of this is that being formally tied to someone with a better credit rating may make it easier to access credit yourself, but it’s important to consider the effect that this will have on the other person.

Tips to manage a joint account

In most cases, a joint account will be operated equally by the account holders, with all parties able to deposit and withdraw funds, as well as pay bills electronically. This means it’s a good idea to have some ground rules about using the account, so here are a few tips to help things run smoothly.

1. Only open the account with a person you trust. If you’re sharing your finances with someone else and giving them access to your money, you need to trust them implicitly. It’s also important to make sure you share the same financial values – if you’re more of a saver while the other person is an impulse spender, there could be issues down the line. Have an honest and frank conversation before you open the account so you know where you both stand and what your expectations are. Which brings us onto…
2. Set boundaries. Setting clear boundaries now can help avoid complications in the future, so you need to be crystal clear on what the account is to be used for. For example, is it just to be used for household bills, or can it be used for other joint spending as well, such as food shopping and holidays? What about individual expenses (such as mobile phone contracts)? It can also be worth setting an expectation in terms of how much each of you will be paying into the account each month.
3. Be open and communicate. If you make a purchase using the joint account, make sure that the other party is aware – especially if this leaves the account with less in it than they might expect. It can be embarrassing for your partner to attempt to pay for something using the joint account only for it to be declined.
4. Regularly review the account. You should regularly check statements and keep an eye on the account balance to ensure there are enough funds to cover upcoming payments. This is where things like standing orders from your personal account(s) can be helpful, and it can be worth setting up a budget for the account too.
5. Check your credit scores. You should check your credit score before opening the account, but it’s worth keeping an eye on it every few months afterwards too. This can ensure there are no nasty surprises, such as unexpected debts being run up or incorrect details being recorded.

What if things go wrong?

If there’s a relationship breakdown it’s important to notify the bank which will be able to freeze the account. This means no-one will be able to access the money, and reduces the possibility of a begrudged ex-partner clearing the account.

It won’t be unlocked until there’s an agreement over how to split the funds, but if this can’t be done amicably it may mean getting the courts involved, which can drag out the process. For this reason it’s often sensible to keep a personal account as well as a joint one, so you’ll still have access to funds should the joint account need to be frozen.

How to close a joint bank account

Closing a joint account is relatively easy unless there is some dispute regarding the funds. If it can be agreed how the money is to be divided, the bank will simply ask for signed permission from both parties before the account is closed (some will allow just one account holder to close it, so make sure to check with your bank).

If you don’t have any other financial ties with that person, such as a mortgage, make sure that the credit reference agencies separate your credit files too. You’ll need to contact them directly to do this.

It should be noted that joint accounts cannot be closed until any overdraft has been repaid in full. If you’re struggling to repay it, read our guide on how to get out of debt.

What happens to a joint bank account when someone dies?

In the event of the death of one of the account holders, any money in the account will typically be transferred to the surviving partner once the bank receives a copy of the death certificate. As with closing an account under normal circumstances, any overdrafts will need to be repaid.

Bear in mind that if you’re not married or in a civil partnership with the other account holder, there may be inheritance tax to pay. Find out more in our complete guide to inheritance tax.