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Joint Checking Account: Is It Right For You?

a couple reviews statements from their joint checking account
Posted in Checking

Maybe you’re considering opening a joint checking account with a significant other, family member, or friend. It sounds like a good idea, but is it right for you? 

When taking the step to combine finances in one account, you want to consider all factors associated with this decision to decide whether you should move forward with a joint checking account or choose an alternative.

What is a Joint Checking Account?

A joint checking account serves the same function as a standard checking account. The only significant difference is multiple people own the account instead of one. 

There are various reasons you might choose to open a joint checking account. Maybe you, and your significant other share household expenses, or you and a travel buddy are putting money in an account to pay for an upcoming trip. 

When you opt for a joint checking account, you and the other account holder(s) names are on the account, have access to checks, debit cards, and can make payments using it. All account holders also have access to online and mobile banking, so transactions are viewable by all.

How Does a Joint Checking Account Work?

When you open your joint checking account, it will work similarly to opening a standard account. You and the other account holder(s) provide information on the application to be considered for account approval. Once approved, all account holders will receive the account deliverables – debit card, checks, etc. – and authorization to make decisions regarding the account. 

Who Owns a Joint Checking Account?

All account holders are equal owners in the checking account. Since money is deposited from multiple people, there must be an understanding of how the funds will be spent. Even if one person contributes all of the money, all account holders have equal access to the funds, so being clear on a spending plan is crucial. 

Pros and Cons of a Joint Checking Account

There are advantages and disadvantages of opening a joint checking account instead of a standard account. Here are some of the most recognized pros and cons of this decision. 

Pros

  • It’s easier to share in contributing to and paying for shared expenses using a joint checking account.
  • The NCUA fully insures all account holders. This increases the total coverage amount. So, one account holder would be covered up to $250,000, but two account holders would be covered up to $500,000. 
  • If an account holder passes away unexpectedly, you will have access to the account without a will or legal representation. 

Cons

  • If an account holder has unmet financial obligations, the funds in your joint account could be garnished. 
  • If an account holder overdraws the account, all account holders are responsible for fees.
  • All account holders have access to the account spending records, which can be a negative if one account holder makes purchases they don’t want others to see.
  • It can be more difficult when filing taxes since account holders could have different tax obligations. You would also want to maintain even better tax records to ensure there’s no confusion when it’s time to file. 

Closing a Joint Checking Account

When you decide to close your joint checking account, it’s a simple process to do so. Although there are multiple names on the account, only one account holder is required to close it. 

Once you remove all funds, you submit a form to the branch to close the account, and that’s it. 

When To Consider a Joint Checking Account

Certain life events lend to having a joint checking account. Moving in together, getting married, and having a baby are three events that generally call for this decision. 

Moving in together

When you move in together, household financial responsibilities – whether it’s contributing to the bills, paying the bills, or purchasing items for the household – will likely be split. 

Therefore, opening a joint checking account can make it easier to take care of those financial responsibilities. Without a joint checking account, you’d have to transfer money back and forth, write checks or send cash, which can feel like a lot of work to do month after month or whenever a new financial need pops up. 

Getting married

Once you’re married, you might decide to open a joint checking account. This could be to manage household responsibilities or just because you want your finances to be one. Either way, having a joint checking account can truly bring your finances together. 

Having a baby

With the ongoing costs of having and raising a child, you might choose to open a joint account with your significant other to contribute to and pay for the expenses. Whether it’s to pay for medical bills, purchase clothing, or decorate the nursery, having a joint account can make this part of your life easier. 

Alternatives To Opening a Joint Checking Account

If you don’t think a joint checking account is for you, here are some alternatives that might work better for your situation.

Maintain separate accounts: You can keep your finances separate by using a standard checking account as you do already.

Open a shared savings account: As an alternative to a joint checking account, you can open a joint savings account. The purpose would be to save for long term goals such as a vacation, wedding, or emergency fund, but it won’t require that your day to day finances be intertwined. 

Transfer funds: If you don’t want to open a joint checking account, you can transfer funds back and forth to pay for various expenses.

Choosing a Joint Checking Account

Whatever your reason for considering a joint checking account, it can make managing your finances easier as long as you and the other account holder(s) are ready for the responsibility of combined finances. 

Checking Account Explained