How to Open a Joint Bank Account and Why You May Need One

Sick of managing separate bank accounts? A joint bank account might be what you need, but there are some pros and cons to be aware of.
Last updated Jul 6, 2020 | By Matt Miczulski
Young couple reviewing finances

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Managing money isn’t always easy. And if you share expenses with someone else, you may constantly worry if they will hold up their end of the bargain.

To make things easier, you may be thinking about opening a joint bank account as a way to simplify your finances. This can be a good idea for many people, but not everyone.

To give you a better idea of what you can expect when sharing a bank account, I’m going to explain what a joint bank account is and why you might want to open one — and why you might not. Then, if this option feels right for you, I’ll walk you through how to open a joint bank account.

Let’s dive in.

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What is a joint bank account?

A joint bank account is a bank account that is owned by two or more people. It functions like any other standard bank account, but ownership of the account is spread equally among co-owners who have equal rights to withdraw money from it. Generally, to be considered an owner on a joint bank account, each co-owner must sign what is known as the signature card on the account. This is a document the bank keeps on file with all the signatures of the account owners.

As a joint account holder, you can withdraw or deposit money as you see fit. For this reason, it’s important that you trust anyone sharing an account with you. Although a joint bank account can be a good way to build a financial partnership with a spouse, roommate, or anyone else you need to share money with, sharing a bank account has some downsides you should be aware of.

Joint bank accounts: the pros and cons

There are a number of benefits and drawbacks of co-owning a bank account with another person. This isn’t limited to non-relatives either. Spouses or partners can share the same benefits and face the same challenges of sharing a bank account.

Joint bank account benefits

  • Simplified bill payments: Couples or roommates can use the money in a joint account to cover shared expenses such as rent, utilities, and internet.
  • Reach your savings goals together: Sharing a bank account can make it easier to save extra cash together toward whatever matters most, whether it’s a vacation, emergency fund, or new appliances.
  • Tracking your finances is easier: As co-owners of the joint savings or joint checking account, you know exactly how much money is going in and out of it, making it easier to track your finances. If you have one account and both set up direct deposit, you can take a lot of the guesswork out of tracking your money.
  • Shared responsibility: With a joint account, you have equal access to the money. You share the responsibility of the account, and there’s no guessing whether the other person is keeping up on their end.
  • More FDIC coverage: Both account owners are insured by the Federal Deposit Insurance Corporation up to $250,000. This increases the amount of total coverage on your joint account.

Joint bank account drawbacks

  • Your money is vulnerable to their creditors. If one person falls behind on their debts, creditors may come after the funds in the account — even if half of it is yours.
  • There could be too much transparency. Both account owners can see the account balance and every transaction, which means anything you purchase is visible to the other person. Some may feel a loss of financial independence due to this transparency.
  • You’re liable if they’re bad at managing money. And vice versa. If either of you overdraws on the account, you’re both liable for any associated fees.
  • It can sour relationships. If you both are on different pages financially and have different financial habits, a joint account could lead to increased tension, which could harm your relationship.

How to open a joint bank account

If you love the idea of having one shared account, you’re probably wondering how to open one. I have good news: it’s simple.

Although the process for opening a joint bank account will vary from one bank to another, in general, setting up a joint account is no more complicated than opening a standard bank account for yourself. At a traditional brick-and-mortar bank, you both will likely have to visit the branch at some point to complete the account opening process. With an online bank, you can typically open a joint account in minutes, all from the comfort of your home.

Whether you choose in-person or online banking, you will probably both need to provide the following items and information:

  • A photo ID
  • Your address
  • Your Social Security number
  • Date of birth
  • Opening deposit (if your bank requires one)

This is just some of the standard documentation you’ll most likely need. The bank may also require other information as a part of its account opening process, such as employment information and whether either of you are subject to backup withholding. Backup withholding is when a bank must withhold and send 24% of the interest they pay to you to the IRS instead. This can happen if you fail to report or underreport interest and dividends on your tax return.

FAQs about joint bank accounts

What is the best joint bank account?

The best bank account for a joint account depends on what both account owners are looking for in a bank. If you both value an in-person banking experience, a brick and mortar bank might be a good fit. If joint savings is your goal and you both value the convenience and often higher interest rates that tend to come with an online savings account, a joint account with a reputable online bank might be a better option. Think about your financial goals, weigh your options, and choose the best savings account or checking account that best meets your needs.

Are joint bank accounts insured by the FDIC?

As a joint account holder, your money is insured by the FDIC up to $250,000. The $250,000 limit applies to all accounts at any one bank of which you are a co-owner. In other words, although you can be the co-owner of multiple accounts at the same bank, you won’t receive more than $250,000 total of FDIC insurance.

For example, if you and your spouse are co-owners of a savings account with a balance of $500,000, your share is $250,000. Therefore, you are fully insured. Your spouse’s half is fully insured as well since their half is also $250,000. If you open another joint account at the same bank, that additional money will not be FDIC-insured.

Can you open a joint account if you're not married?

Yes, you can open a bank account with individuals to whom you are not married. The FDIC stipulates only that a co-owner be a natural person, not a legal entity such as a corporation or trust. Therefore, you can open a joint bank account with someone even if you aren't a married couple.

Are joint bank accounts a good idea?

Whether a joint account is a good idea depends on your particular situation. If you are concerned about your significant other overspending and incurring overdraft fees, individual accounts may be a better option. If you have similar spending habits and feel that consolidating your finances will make managing your money simpler, a joint bank account might be a good idea. Most importantly, you have to trust one another. Without trust, the risks will likely outweigh the benefits of sharing a bank account.

Who owns the money in a joint account?

As co-owners, you both share equal ownership of the money in the savings or checking account. You can both make withdrawals and deposits as you please.

What happens to a joint account if one account holder dies?

State law and the account agreement will determine what happens to the money in an account if a co-owner of a joint account dies. According to the Consumer Financial Protection Bureau, if the account has what is known as the right of survivorship, all the money in the account passes directly to the surviving owner. If it doesn’t, the share of the money belonging to the deceased owner will likely be distributed through his or her estate.

The bottom line on joint bank accounts

A joint bank account can be a great solution for couples, roommates, or anyone else who can benefit from having their money consolidated in one account. It can simplify bill payments, and it can give you a more united approach to saving toward shared goals.

Although a joint bank account is a great option for some people, it’s not the best option for everybody. Trust is a must when sharing a bank account with another person where both people have equal ownership over the funds in the account. If you fear the other person will abuse their access to your shared money, it’s probably best that you maintain separate accounts.