What Joint Bank Accounts Are and How They Work

Q: How does a joint bank account work?

A joint bank account works almost exactly like an individual bank account. The main difference is that an individual bank account has only one owner who can access it, whereas a joint bank account is controlled by two people equally.

Q: Can you turn any bank account into a joint bank account?

All banks and credit unions have different rules regarding joint bank accounts. While some financial institutions will convert an individual account into a joint one, others may require a couple to open a new joint account together.

Q: What are some possible downsides of a joint bank account?

Some disadvantages of joint bank accounts include the lack of full control over account funds, the potential for unexpected charges or withdrawals, and, perhaps, fights over spending decisions. Couples need to agree on their intentions for a joint bank account if they want to avoid conflict.

Guide to Joint Savings and Checking Accounts

Jacqueline DeMarcoUpdated March 4, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

When two people join their lives, it can be very convenient for them to combine their finances in shared bank accounts. Joint checking and savings accounts are co-owned by spouses and enable them to streamline bill paying and management of household expenses. Complications can arise if the spouses divorce, but while they’re together they may well appreciate the accounts’ convenience. Keep reading for more on how to open a joint bank account and how these accounts work.

What Is a Joint Bank Account?

To get started, it helps to know what joint accounts are. A joint checking account or a joint savings account works like an individual bank account, except that two (or more) people co-own it. Each person can deposit, withdraw, or spend the money. The law usually considers each party entitled to half the money in the account, no matter who contributes more. However, any co-owner of the joint account has the power to take out all of the funds and close the account whenever they wish. This is why it’s wise to open a joint checking account or joint savings account only with someone you trust. One unusual advantage of sharing a joint bank account with someone is that both account holders are separately insured for up to $250,000 by the FDIC or NCUA. A two-person joint account is thus insured for $500,000, twice the amount of a normal individual bank account.

Joint Savings Accounts

A couple deciding to share a bank account may choose a joint savings account. Both can contribute to the account and plan together for saving or spending as they see fit. Joint savings accounts can be very helpful for couples working towards shared financial goals such as buying a home together or paying for a child’s college education.

Joint Checking Accounts

Similarly, joint checking accounts resemble normal checking accounts except that both owners can access the account equally. A joint checking account can be a great fit for couples where both contribute to living expenses and bills. For best results, account holders should keep each other informed about their individual spending as well.

How Do Joint Bank Accounts Work?

As noted earlier, joint checking and savings accounts function in the same way as individual checking and savings accounts. The only significant difference is that the account belongs to two people. Both co-owners can make deposits or withdraw money from the account without restriction. So even though each spouse may be considered the owner of half the money, either one has the right to withdraw the entire balance or close the account. Recommended: Joint Bank Accounts for Unmarried Couples

Advantages and Disadvantages of Joint Bank Accounts

Now let’s look at some pluses and minuses of joint bank accounts.

Advantages

Joint bank accounts can have many advantages. Some of them are:

Increased transparency. If a couple decides to combine their financial lives, sharing a bank account enables both partners to see all transactions and know account balances.
Easier money management. When sharing expenses like rent, car payments, groceries, and utilities, both partners simply contribute equal sums to a joint bank account for paying these bills. Using a joint bank account can also make it easier for a couple to track their combined monthly income and monitor how much they spend each month.
Teamwork. Using a joint bank account to manage their finances and work together towards their financial goals can make couples feel more united.

Disadvantages

There are also some disadvantages associated with joint checking accounts, such as:

Potential misalignment. If one co-owner decides to remove a large sum of money from the account without telling the other, this can lead to problems like late payments or overdrafting.
Shared mistakes. Overdraft fees, late fees, and other penalties become joint issues. For example, if one partner accumulates debt (such as credit card debt), a creditor may be able to go after the money held in a joint account.
Unilateral decisions. As mentioned above, with joint accounts, one owner has the right to withdraw all the money and close the account without notifying the other owner.

Pros	Cons
Increased transparencyEasier money managementTeamwork	Potential misalignmentShared mistakesUnilateral decisions

Tips for Opening a Joint Bank Account

People sharing a joint bank account can benefit by keeping in mind helpful tips like these:

Set out rules and responsibilities. Before opening a joint bank account, it’s important to agree on how much money both parties will contribute, how much they expect to remove, what the money can be spent on, and who will be responsible for paying bills. That way, it’s less likely there will be account-related surprises for either partner.
Keep some money in individual accounts. Even if you plan to eventually integrate your finances, it can’t hurt to make such changes slowly. Some couples may feel more secure if both partners keep some money in individual accounts as well.
Talk about money often. One of the best ways to stay aligned financially and avoid money fights is to have frequent, honest conversations about spending habits and savings goals (such as paying for a wedding without taking out a personal loan).

Recommended: Joint Bank Accounts for Married Couples

What Happens to a Joint Account if the Partners Separate?

If a couple decides to separate, they may have to take many steps to disentangle their finances (such as figuring out what happens to their credit card debt during a divorce). A joint bank account can remain in effect despite the separation. To close it, the ex-spouses would need to divide up the money. Each would then transfer their share to their individual bank account before one or both people terminate the joint account.

The Takeaway

The advantages and disadvantages of joint accounts are worth careful consideration. Having a joint bank account can make it easier for couples to share household expenses and manage their finances together. Mutual trust is key, as are communication and agreed-upon rules. Some couples may opt for a joint checking account, a joint savings account, or both. Others may choose to keep their finances separate, or to have joint accounts as well as individual ones.

3 Money Tips

Checking accounts are ideal for everyday transactions but earn little or no interest. Savings accounts are better for storing and growing your money — they earn higher interest but often restrict how many withdrawals you can make per month.
To get into the savings habit, consider having 10% of your paycheck directly deposited into your savings account. Or, set up a small automatic recurring transfer from your checking account into your savings account on the same day each month.
To set up a simple monthly spending budget, consider the 50/30/20 rule. This involves splitting your after-tax income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings.

Frequently Asked Questions

How does a joint bank account work?

Can you turn any bank account into a joint bank account?

What are some possible downsides of a joint bank account?

Photo credit: iStock/dragana991

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About the Author

Jacqueline DeMarco

Jacqueline DeMarco is a personal finance writer and editor based in Southern California. While she spends the bulk of her time writing about complex financial issues, she also tackles a variety of subjects ranging from food to fashion to travel. Her work can be found across dozens of publications such as Credit Karma, LendingTree, Northwestern Mutual, The Everygirl, and Apartment Therapy.

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