What is a joint bank account?

A joint bank account can make your financial life easier and less complicated if you manage your money with another person, such as a spouse or partner. A joint savings or checking account offers many everyday banking conveniences, but there are some factors to consider before opening a joint bank account.

What is a joint bank account?

A joint bank account is an account shared with another individual for things such as paying the bills, depositing paychecks or saving for a vacation or down payment on a large purchase, such as a house or car.

Most often, joint accounts are held by one individual and a spouse or partner, family member or business partner, but it’s possible for any two people to open a joint bank account together.

How do joint bank accounts work?

Joint bank accounts work similarly to other bank accounts. Joint checking accounts work like checking accounts, letting you write checks and use a debit card. Joint savings accounts work like savings accounts, keeping your money safe and paying interest.

The primary difference is that both people who own the account have full control over it. Each account owner can get a debit card, write checks and make purchases. Both account holders can also add funds or withdraw them from the account.

The money in joint accounts belongs to both owners. Either person can withdraw or spend the money at will — even if they weren’t the one to deposit the funds. The bank makes no distinction between money deposited by one person or the other, making a joint account useful for handling shared expenses. But a joint bank account should only be opened with someone whom you trust, since that person has equal control over the account’s funds.

Pros and cons of a joint bank account

Pros of a joint bank account

Convenience

The biggest perk of opening a joint account is the convenience of having money in one place. A joint bank account can be helpful if you and someone else share responsibilities, such as running a household or business, since it allows you to both contribute to and withdraw from the account, says Lauren Anastasio, a certified financial planner and director of financial advice at Stash, a financial services company.

It’s also, of course, a way to pay the bills. “This gives multiple people access to the account to help divvy up responsibilities,” Anastasio says.

If you’re a married couple who shares money and bills, for example, then having a joint account could make managing your finances much easier. After all, a joint account lets both of you cover expenses and pay bills with the money you share, versus having to have separate accounts and figure out how to “split” bills in another way.

A potential larger account balance

Joint accounts can also help couples take advantage of benefits that may not otherwise be available to them, says Kevin Condon, senior vice president, head of digital payments at Bank of America. For example, pooling your money can help you meet the minimum balance requirements needed to get benefits like getting maintenance fees waived or rewards that result in lower interest rates on loans.

More FDIC insurance coverage

Joint ownership also increases the amount of FDIC insurance coverage. Ravi Kumar, head of CIT Bank, says that each co-owner of a joint account is insured up to $250,000 for the combined amount of his or her interests in all joint accounts at the same insured depository institution. For example, if you owned your own account with a balance of $500,000, you’d only be insured by the FDIC up to the $250,000 limit. But if that same $500,000 was deposited in a joint account with your spouse or partner, your money would be insured for the full amount.

Cons of a joint bank account

Potential for overdrafts

The chance of overdrawing the account can be greater when two people have access to the money in an account. You can help avoid this by discussing larger purchases with your partner before using money from the account for them.

Trouble if relationships end

If you and your partner split up, they could try to stake claim to half of the account balance, even if you feel some of the funds belong solely to you — such as money from an inheritance or work bonus.

Subject to creditors

If two people share a joint bank account and one of them has unpaid debts, creditors can go after the shared money in the account to satisfy those debts.

Lack of privacy

A joint account might not be the best option if both parties are not comfortable sharing with each other how they spend their money.

Is a joint bank account right for you?

If you’re wondering who owns the money in a joint bank account, that’s an excellent question. Corbin Blackwell, a financial planner at Betterment, says it’s also one that should lead you to think long and hard before opening a joint account with just anyone.

“Because joint accounts mean joint ownership, you should only fund a joint account if you completely trust the joint owner, as they will have access to funds that you deposit into the account,” she says.

If you share an account with someone who has trouble sticking to a budget, you could see more money being taken out of the fund than you’re comfortable with.

Some examples of times when a joint bank account makes sense are:

• Couples who manage their money together and share household expenses
• Adult children sharing a joint bank account with elderly parents
• Business partners sharing a joint business account to cover expenses and payroll
• Parents opening a joint account with their children to oversee their savings as they learn positive money habits

It’s best to only open a joint account when you’re actually sharing funds with another person, Michael Foguth, a financial planner at Foguth Financial Group in Brighton, Michigan. “If you like to keep your money private, then a joint bank account isn’t for you.”

How to open a joint bank account

The process of opening a joint bank account is similar to opening an individual account. You can sign up for a joint account at a bank branch, and many banks and fintech companies allow accounts to be opened online.

When you open a joint account, both applicants have to provide personal information, such as email address, name, address and phone number, as well as Social Security number and date of birth.

Many banks also allow you to add another person to an existing bank account by contacting the bank and providing all the personal information required.

How to close a joint bank account

Closing a joint account is similar to closing any other bank account and may require a visit to a bank branch with both account holders present.

Have proof of identity (like a valid photo ID, such as a driver’s license) available when you close a joint account. You will also need to withdraw or transfer all funds from the account before closing it. A completed form requesting the closure, either online or in person, typically is required.

A request to close a joint account can also be faxed, emailed or mailed, depending on the bank or credit union. If your joint bank account is with an online bank that doesn’t have any branches, each account holder may need to enter their sign-in credentials and approve the closure.

Can I open a joint account online?

You can often open a joint account online, and the process is similar to opening an individual account. You choose a bank, select the account to open and provide some personal information. For a joint account, both you and the other account holder will need to provide the requested information.

After you provide the initial deposit, the bank will send the account materials, like debit cards and checks, to both account holders.

Who pays taxes on a joint account?

If you and your joint account holder are married and file one tax return, all you have to do is include the interest in your tax filing. If you file separately or aren’t married, things get more complex, depending on which state you live in. Check with a tax advisor if you have questions.

Another thing to consider if you have a joint bank account with someone who isn’t your spouse is gift taxes. If you deposit a significant sum to a joint bank account and your joint account holder makes a large withdrawal, it may trigger gift taxes. For 2022, the annual gift tax exclusion is $16,000, so the trigger will be pulled only if the joint account holder withdraws more than $16,000 from the account without making any deposits. Consult with a tax advisor for advice, should you have questions.

Bottom line

There are risks involved in opening a joint bank account, including the risk that one account owner goes rogue and withdraws all the money, or the risk of collections activity. Joint bank accounts nevertheless have their place and work for a wide range of consumers — especially couples who share household finances.

Whether to open an account with another person is a personal choice. Just make sure you know the pros and cons, and that you approach any decision to open a joint account with caution.

–TJ Porter contributed to a previous version of this article