Joint bank accounts work just like any other bank account you have, except there are multiple authorized account holders. Authorized account holders share all the same responsibilities and abilities as you would have on your own account. Anyone named on the account can make payments, e-transfers, make withdrawals, pay off debt, and so on. Sharing a bank account with someone can be beneficial, but it also comes with a lot of responsibility and trust.
Before you decide to get a joint bank account with another person, it’s best to weigh out the pros and cons. You need to be sure this is the best decision for you financially. Before opening a joint account ask yourself these questions and be honest with yourself.
Why get a joint bank account?
There are many reasons why you may decide to get a joint bank account. If you are married and share the same financial goals, you may choose to share an account with your spouse to keep your finances on track. If you are a parent, you may share an account with your child to keep track of their spending habits before they are eligible to get an account of their own.
When you open a joint bank account, each party will receive their own bank card and have access to online banking to keep track of their finances. Keeping track of everything through multiple accounts can be difficult to manage. A joint account makes it easier to keep track of your finances in one place. It also makes it easier to split financial responsibilities and creates more transparency while possibly saving on bank fees.
What are the benefits of having a joint account?
What’s great about having a joint bank account is that it makes it harder to conceal any financial problems. For example, let’s say you’re planning on opening a joint bank account for your child. This gives you the ability to review the account at any time. This way, you can ensure your child isn’t recklessly spending their money and can help keep them on track with their financial goals.
If you are married, a joint account can protect you in the event of a financial emergency. As an example, let’s say your spouse unexpectedly passes away. If your money is shared in joint bank accounts, there won’t be any issues securing the money as you share the accounts already.
What are the cons of having a joint bank account?
Sharing a bank account can also have big downfalls. Before you choose to open a joint account with someone else, you need to ensure that you both fully understand the terms and conditions involved. When you open a joint account, all parties have an equal responsibility that all payments are made on time. If there is any debt in your shared accounts, that debt is also shared.
Joint accounts can also make things difficult in the event of a divorce or separation. Joint accounts can be messy to separate – so also keep this in mind when deciding whether opening a joint bank account makes the most sense or not.
Do you have to worry about debt and a joint bank account?
Having a joint bank account can also mean joint debt. When you and the other party agree to share a joint account, you are agreeing to share the responsibility of paying off any debts. This doesn’t always mean the debt is split 50-50 either. If the other authorized account holder can’t pay off the debt, you are fully responsible for paying off that debt as a joint account holder.
Even if you are not responsible for creating that debt, you are still obligated to pay it off if the other party can not.
That’s why it’s crucial that the person you choose to share a joint account with is someone you know will meet their financial obligations.
What happens when you need to consolidate your debt and you have joint accounts?
Debt can occur quicker than you think. Especially if you have a joint account and both parties aren’t communicating their financial decision to one another. In this case, you may have built up a lot of debt and need to begin consolidating that debt. When you begin the consolidation process, you need to list your personal accounts along with your joint accounts as well.
If you have accumulated a lot of debt, you will only need to include your partner or spouse in your debt restructuring plan if you share joint accounts. This includes:
- All assets are considered “joint assets” wherein both names appear
- Joint liabilities where both names are responsible for the debt
- The combined income of the family.
In most cases, spouses share accounts or have joint financial responsibilities. However, usually, if you’re just consolidating your own debt but your spouse’s name appears on a few nominal documents, they are not obligated to have their affairs investigated and their financial standing remains unaffected. If you are married, in almost all cases you are not responsible for your spouse’s debt unless it’s a joint account. But just remember, your spouse’s debt could affect your overall household or estate equity if your assets are joint with your spouse, even though your debt is not.
Are Ready to pay off your debt? We can help.
Joint debt is easy to accumulate if you and whoever you choose to open an account with is not careful. If you or someone you know is struggling with debt, we can help at 4 Pillars. If you have accumulated a lot of joint debt, we can help you make a plan to consolidate your debt and eliminate it once and for all. By working with one of our debt relief specialists, we can help you can manage your debts with an efficient plan to pay them off. A debt-free life is possible, and it doesn’t have to take a lifetime when you work with us at 4 Pillars. If you’re ready to get started, give us a call today and book your free consultation with one of our debt relief experts today. When you’re ready, give us a call at one of our 3 locations across Northern Ontario or book a consultation online. You can reach our Muskoka & Parry Sound office at 705-640-0187, our North Bay office at 705-980-0158, or our Sudbury office at 705-806-1252.