Are you contemplating a joint checking account? Learn this earlier than opening one

Forget making Facebook official. Opening a joint bank account is the real proof that you feel committed.

OK, not really. For many married couples, long-time domestic partners, families and even housemates, joint bank accounts facilitate the budgeting and sharing of bills administration.

What is a joint bank account?

A shared bank account is comparable to every other bank account you open with your bank or credit union, You can use it to save money and earn interest, issue checks and pay through a debit card for payments and even set them up for direct deposit and automatic bill payment.

What is different? You are not the only account holder. Shared bank accounts can be used by more than one person (usually two, but in some banks up to four) as account holder. This means that they have the same right to deposit and withdraw money, and are as liable for overdraft charges as you are.

Why a common bank account might be right for you

The main reason why people open a joint bank account is because They are married or domestic partners with shared issues and shared savings goals. Sharing a bank account can make you more disciplined with your own spending and develop a team mentality for saving for specific goals.

But romantic partners are not the only ones who open joint bank accounts. Sometimes parents add children to their accounts, e.g. For example, students or young teens who are just starting to learn money management. Persons with aging parents can be booked into their parent's account to make medical expenses or travel to the grocery store easier. If you trust your roommates enough to open an account for rent and utilities, you can easily take the shared household expenses.

A big advantage of common bank accounts is the financial power of the combined money. Often, certain accounts pay higher interest rates if you have more money in them. Achieving this sum is easier with more than one contributor.

Possible dangers of common bank accounts

Bankers beware: Common bank accounts have one amount So make sure that you trust your co-owner on a personal level and a financial level before the opening.

For starters, when a relationship or friendship ends badly, the other co-account holder can empty the account before you can freeze the funds (or withdraw them). If your relationship is on rocky groundA shared bank account is not a good idea.

Some partners, who do not see spending and savings on an equal footing, should consider separate accounts to avoid struggles.

Professional tip

Instead of putting all of your savings into one account, create an account for monthly contributions on shared bills and separate the rest of your finances.

Another important thing about shared bank accounts is what can happen if your co-account owner does not manage the funds properly. You may be solely responsible for overspending, but the bank will hold both of you responsible for the resulting overdraft charges – and you will also get all the money out of it.

Common bank accounts can also have a negative impact Your credit score, If the other account holder has a bad credit, you will probably notice a decline in your own score.

In addition, each balance on a common bank account will be credited to your entire assets. That is, if one of the account holders Declare bankruptcyThe money in the joint bank account is a fair game for the creditors, even if you have actually contributed most of this money.

Equally frustrating is the fact that shared funds are credited against your child at school as financial support against them, while an account that is shared with someone on Medicaid excludes them from receiving benefits.

After all, shared bank accounts can become chaotic if one of the owners dies. Because of the "right of survival," all the money goes to the other co-owner, even if you intended to have some of it distributed to other family members, friends, or organizations through your will.

And even if you intend to pass the money on to the co-owner after death, the co-owner may still have to pay inheritance taxes, depending on the amount in the bank account.

This is how you open a joint bank account

If a common bank account makes sense to you and your partner, parent, child or roommate, apply online or visit a branch of your chosen bank in person to open the account. The process is usually simple. Please bring with you:

Proof of identity such as driver's license or passport
Proof of address, like a utility bill
Your first deposit (this can also be obtained electronically from an existing account at another institution if required)

You must complete an application and voila! You now have a joint bank account. You should receive a debit card, a checkbook, and information about how the account works.

However, before signing on the dotted line, you must ask some important questions:

What happens if the relationship ends with the account owner? How do you freeze money?
Can a person withdraw all funds at once? Is it possible to limit payouts if both parties are not present?
Who is responsible for paying overdraft fees?

Are you considering an online bank for your new joint bank account? Take a look at our favorites Online savings and Online checking accounts for 2019.

Timothy Moore leads a team of editors and graphic designers from a market research firm as a full-time gig. As a freelance writer he writes about personal finance, career, education, animal care, travel and the automotive industry. His work has been published on, The Ladders, Glassdoor and The News Wheel.

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