Who pays the rent or mortgage, the utility bills or council tax? Does everyone else set up a standing order to pay money into one person’s account? What if the designated billpayer hits hard times and spends the pooled money, or creditors get a court order to claim the monies they are owed? These may sound like horror stories, but they are real problems that can easily occur when shared finances go wrong.
The good news is that there’s an easy solution which can help simplify managing money in a couple or group. A solution that can give groups the power to choose who can do what with shared money: a joint account.
Joint bank accounts often mirror individual current accounts in terms of costs, charges and features. What sets them apart is that they are held in the names of multiple people, rather than just one person.
Couples (or groups) needing to pay for shared costs can do so from a single account, which makes tracking who has contributed what very easy. It also ensures that every member of the group can see what bills have been paid and when, so they can avoid nasty shocks.
Although joint bank accounts tend to be the preserve of couples or other setups that involve multiple people cohabiting, any group of individuals who agree that they want a joint account can open a bank account together.
The same account eligibility restrictions apply as if you were applying for an individual current account, such as age, residential status, credit rating etc. Assuming every member of the group would be accepted for an individual current account in their own right, the group as a whole should have no issues obtaining a joint account.
Most current accounts available to individuals in the UK are also available jointly, so it makes sense for all parties to do a little research before applying.
Different people within the group will probably have a preferred bank. Some of this will be due to their own experiences with different banks, but convenience could also be a major factor if the new joint account can be linked to their existing current and savings accounts on their mobile banking app.
Although it’s likely that everyone will have a preference for a particular bank provider, it does make sense to shop around and check the product details of each offering carefully. For instance, it may be that an account you could comfortably maintain with your own salary may be a bad choice for the group, because the minimum amount that you have to pay into the account is higher than the total you’ll be collectively contributing.
If you’re willing to pay a small fee, a joint account can be a great way of accessing some premium banking benefits at a discount. This is because most packaged current accounts taken out on a joint basis extend the benefits to all account holders, without having to pay a larger fee. This means that groups can collectively benefit from mobile phone insurance, travel insurance, cashback on utility bills, and more.
Setting up a joint account does have some complexity that doesn’t exist with individual accounts, because you need to consider how each of the joint account holders will interact with the account. Should everyone get a debit card, or no-one, or just a few select people? How many signatories are required to authorise a direct debit or standing order on the account?
This needs to be established in the mandate for the account, and you need to take some time to get this right, as you’ll need all parties to agree if you want to change this in the future.
The FSCS (Financial Services Compensation Scheme) protects individual depositors for £85,000, so if your bank fails, you can claim that back.
However, this protection applies per person and per institution. So if, for example, you had £85,000 in your personal account with an institution, and at the same institution you also had a joint account with your partner with £10,000 deposited, and the bank failed, you would only get £85,000 compensation. Not the full £90,000 (£85,000 plus half of £10,000) you had deposited.
Although joint accounts are very useful and can help you access perks that would be more costly individually, they are not for everyone.
If, for example, you are cohabiting with someone who has a particularly bad credit score, a joint account might be a bad idea. Because they’ve had difficulties managing money in the past, they might mismanage your money too.
You may be able to open a shared bank account if one of the parties has a bad credit history, however, you may want to consider the consequences. If one of the parties has a less than perfect credit score, then the other party’s credit score will suffer as a result. It also goes without saying that you must trust the other joint account holder: either one of you can access (and withdraw) all the funds in the account at any time.
If you already hold a joint account and wish to switch to another provider, you can apply for the seven-day switch, which most banks offer. However, if this is your first joint account, and it is going to be in addition to your current accounts (which will remain open), both parties will need to provide ID, and sign paperwork and return it to the bank. If everything is in order, it should take no longer than ten days.
In most instances, applying for a joint account is much the same as applying for an individual account. The process can be completed online, over the phone, or in-branch, and every member of the group applying will need the same paperwork necessary to apply for an account individually:
Proof of identity
Proof of address/residency
Proof of income
While most banks allow for joint applications online and by phone, some don’t. If your preferred provider doesn’t offer that option, you’ll all need to visit a branch together.
Most high street banks are covered by the FSCS (Financial Services Compensation Scheme), which means that if your chosen bank goes into liquidation, each account holder would be eligible for up to £85,000 compensation per institution (so £170,000 for two joint account holders).
Yes, you can certainly apply for an overdraft with your joint account, as most banks offer one, but you will have to pass a credit check to be successful. Remember though that both parties are individually and jointly responsible for any debt that is accrued on the account, meaning that the bank can pursue either party for any monies due, regardless of whether you were responsible for the debt.
If you and your joint account holder split up, the easiest thing to do is to split the money in the account and close it down. This will, however, require a signed agreement from both parties. If this is not possible, then one of the parties can sign a mandate to freeze the account with the bank, until an agreement can be reached.
The money held in any joint account at the time of the death would be transferred to the surviving account holder (because of the principles of ‘survivorship’), and would not form part of the estate of the deceased.