Very simply, a joint account is a type of current account where two (or sometimes more) people can access funds, make deposits, withdrawals and do all the things that are possible with a bank account with a single holder.
Joint accounts are readily available from nearly all banking providers. There’s quite a range to choose from so it pays to compare when looking for a new provider. As with bank accounts, most joint accounts do not pay high rates of interest, although there are a few high interest bank accounts available.
Joint accounts work very much like any other banking account except that two – sometimes more – people are the named account holders. Most joint accounts tend to be set up so that either of the named account holders can withdraw funds and carry out normal banking activities – however, some joint accounts require the permission of both (or all parties if more than two) account holders.
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.
Joint accounts are 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.
Opening a joint account is very much the same as opening an account for a single person. However, as you’d expect, 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.
In the event that one or more of the account holders has a poor credit score, then some providers can offer a joint basic bank 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. Therefore, it’s a good idea to have some ground rules about using the account.
1 – Set a budget
Work out how much you will both need to deposit in the account to cover your joint expenses. Also, be clear on what the joint account is to be used for – for example, while you would likely want your mortgage or rent to come out of the joint account, you may agree that the account is not to be used for individual expenses (such as mobile phone contracts).
When it comes to shopping, the weekly groceries are very likely a joint expense whereas clothes are an individual expense.
Clear boundaries about what the joint account is used to pay for will avoid arguments about money.
2 – Set up regular payments
Once you know the total of what will be paid for by a joint account, you need to decide how much each of you pays toward this figure and when. To avoid missed payments, it’s a good idea to set up a standing order to be paid from your personal account into the joint account on a regular basis. This can be done for the start of the month or perhaps the day after your payday.
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 joint 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.
In addition, keep a regular eye on your joint account balance and ensure that you have enough funds to pay for upcoming payments. This is important if you want to avoid the potentially high charges of an overdraft or a declined direct debit.
4 – Set up a regular review
Keep your joint account budget up to date. As time passes, how you will be paying for things will likely change. The simple consequence of inflation means that each year your regular spending on things like fuel or groceries will start to creep up. Make sure that you adjust your contributions to take this into account.
This depends on the banking provider you use. Some joint accounts are limited to just two people, but there are providers who will allow more than this.
In a similar vein, personal joint accounts are not suitable for use by business or charities. To find out more, read our guide on the advantages of keeping personal and business accounts separate.
While opening a new joint account itself will not have a detrimental effect on your credit score, you should be careful if one of you already has a poor credit history.
Opening a joint account with someone will ‘tie’ you together in terms of creditworthiness too. While you might have an excellent credit rating, having a joint account with someone with a poorer credit score can bring your credit score 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.
Just as when you are looking to open a new account or move an existing one, it’s a good idea to compare providers and the benefits that they can offer in return for your custom. It’s also a good idea to see how they are rated by their existing customers – are they considered a good banking provider or are their customers largely unhappy with the service they receive? Doing a little bit of investigation can prevent you from jumping out of the frying pan and into the fire! One way you can compare banks is by checking out the providers in our bank account comparison tables. This will give you a fair and impartial idea of the benefits of the accounts on offer compared to the rest of the market.
Another good idea is to have look at the latest banking service standards survey. This is a quarterly report issued by the Financial Conduct Authority (FCA) and provides a way of measuring a bank’s performance against a set of standardised criteria, such as how long it takes to open a bank account, to arrange an overdraft or obtain access to online banking.
While not all banks contribute to this, you’ll find that many banks do – making this a useful way of determining which providers are best at doing the things that are important to you. You can find more information in our guide: How satisfied are consumers with their banks?
Opening a joint account with someone is a serious financial commitment for all concerned and should not be entered into lightly. As detailed above, a joint account 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. Remember that with a joint account, the commitments made by one party must be honoured by both account holders. Or, to put it simply, you will be equally liable for any monies owed to the joint account even if these debts were run up by your partner.
For whatever reason, there may come a time when you wish to close a joint account. This is relatively easy unless there is some dispute regarding the funds. If it can be agreed how the money is to be divided, then the bank will simply ask for signed permission from both joint account holders before the account is closed.
It should also be noted that joint accounts cannot be closed until any overdraft has been repaid in full.
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 likewise 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 – even if one person has put all the money in the other can still withdraw or spend it as they desire. That’s why it’s important to think carefully before opening a joint account that is not ‘both to sign’.
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.
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.
All banks and building societies that are registered here in the UK are signed up to the depositor protection scheme (the Financial Services Compensation Scheme, or FSCS). This protects the money in your account if a bank goes bust. For a single account, cash deposits are protected up to £85,000 and £170,000 if the money is held in a joint account.
If you have a temporarily high balance then, under certain circumstances, this is protected up to £1 million for up to six months.
However, it is important to remember that these compensation limits are per banking licence – rather than per account. For example, if you hold two accounts with a bank – say a current account and a savings account – then any compensation is still limited to a total of £85,000, rather than £85,000 per account. This restriction also applies where two banks share a banking licence. For example, Halifax and Bank of Scotland operate under the same banking licence, so you would only be covered up to £85,000 (or £170,000 for joint accounts) across both banks.
For more information, see our Depositor protection schemes guide.
An arranged overdraft for a joint account works in much the same way as on a sole account. Basically, this will be a form of credit where you can spend more money than you have in your joint account up to a certain limit. If you go beyond this limit (or don’t have an arranged overdraft), this becomes an ‘unarranged overdraft’. In both instances, there may be interest charges and possibly other fees, such as refused payment fees, if you don’t have enough funds available.
The major difference with a joint account overdraft is that both parties are liable for repayment. Therefore, even if the overdraft was run-up by your partner, you are still liable for repayment if the bank demands it.
Having a ‘both to sign’ joint account prevents the other party from doing anything without your authorisation – which means your cash is safer, but it makes operating the account more difficult.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.