Joint bank accounts are almost exactly the same as current accounts for individuals. The only significant difference is that joint accounts are held in the name of a number of people, while individual accounts are held in one person’s name.
Joint accounts can be opened by couples, cohabitees, or really any group of people, so long as all parties meet the bank’s eligibility criteria. Joint accounts can be very useful if you share a house or have other shared expenses, but they shouldn’t be rushed into: you should fully understand your obligations and the potential pitfalls of holding a joint account before applying.
The main advantage of holding a joint account is simplifying household finances.
Once created, a joint account can be used to pay joint bills like rent, mortgage, or utilities. They are very popular with cohabiting couples: rather than splitting the bills and keeping track of who has paid what, you simply pay an agreed amount into the joint account, and then you pay the direct debits and shared expenses from there.
Joint accounts are also popular in situations where one member of the group earns the majority of the household income. Rather than handing over cash for living expenses to the other party, they can simply pay money into a joint account which everyone can access.
The other advantage offered by joint accounts is that every member of the group gains discounted access to the benefits available from a packaged account. This is because most packaged account providers do not charge a premium for multiple account holders.
Applying for a joint account is almost as straightforward as it would be for multiple people applying for their own individual accounts. Each potential account holder must complete the application form (usually online), providing their personal, residential, employment and income data. This must be submitted alongside details of who is authorised to use the account and in which ways.
This information is contained within the mandate establishing the account. It’s important to consider your mandate carefully before submitting it, since it will affect the way the account can be used, and it could require the agreement of all parties to alter. For example, requiring two signatories to set up a direct debit or standing order might seem like a good idea, but it can make paying bills a bit painful.
Once all the required information and the mandate have been submitted, the bank will undertake credit and identity checks. Assuming you meet the bank’s eligibility criteria you should be accepted for an account.
If you already have an account and you’re switching your bank, you will also need to complete documentation regarding your old account, so your new account can be seven-day switched across to your new provider.
Although joint accounts can be a powerful tool for managing your finances, there are circumstances when a joint account doesn’t make much sense.
Since joint accounts are mainly used by couples, the primary consideration should be whether the relationship looks destined to last. Bear in mind that you both might have a different opinion on the long-term health of the relationship. Joint accounts can add an additional layer of complexity to any breakup, so carefully consider this before applying.
You should also think very carefully before applying if one of the party has had a poor history of credit, since joint accounts will establish a financial link between all account holders in their credit files. If any of the parties have a lower credit score than you, your score will likely be dragged down a bit. Obviously, if you’ve spent a long time nurturing a good credit rating, and want to be accepted for the best credit products in the future, this might be a deal-breaker.
Equally, if you think that your partner or cohabitees don’t possess money management skills that match yours, you should think twice about opening a joint account – or at least adjust your mandate accordingly. Overdrafts established in joint names are the responsibility of all parties, regardless of whose spending created them. In theory they are the responsibility of all parties, but in practice banks can choose whether to pursue all parties or just one of the account holders for repayment. Usually, they will opt for the path of least resistance.
So, if you have a good income, and your fellow joint account holders don’t, the bank will probably seek to retrieve their money from you. Whether you ever get this money back from your fellow account holders is not their concern.