Joint Bank Account Facts to Consider Before Opening One

Two or more people can open a joint bank account if they wish to combine their finances and share access to a single account. Business partners, parents and children, and married couples often choose to open this type of bank account.

The Value of Trust

Opening a joint bank account involves more risk than an individual account, because you are entrusting another person with your finances. If you completely trust the other account holder(s), however, a joint account can make handling finances (e.g. paying bills) much easier. With most joint accounts, both parties are held responsible for bounced checks, overdrafts, and any other offenses. All shareholders must stay on top of account balances, deposits, and expenses.

Types of Joint Accounts

One of the main concerns with a joint account is the right of survivorship. Who will receive account assets if one shareholder dies? There are different types of joint accounts to fit the needs of various relationships.

  • Joint Tenants With Rights of Survivorship (JTWROS) – This is the most common joint bank account, in which all assets are passed to the surviving party in the event of an account holder’s death. With a JTWROS, all shareholders have equal rights to account assets and can conduct transactions without the approval of other account holders.
  • Tenancy In Common – This is a popular joint account among business partners. With a Tenancy In Common account, any account assets of a deceased holder belong to whomever he or she named in their will. With this type of joint bank account, owners may have unequal shares and therefore receive proportionate interest rates.
  • Tenancy By The Entirety – This is a more regulated joint bank account that requires all shareholders to sign for or approve any account transactions.
Red Flags

If you are considering opening a joint bank account with another person, be sure that he or she has a solid credit history. If your partner owes a significant amount of money on loans or other debt, you may want to consider keeping individual accounts until the debts are settled. Keep in mind that under most joint accounts, all holders have unrestricted access to the account. To creditors, a joint bank account is the same as an individual account; both parties are held liable for any debt.

Choose Your Bank Wisely

Do not choose a bank based on promotions or giveaways for opening a new account. Instead, research customer reviews and ratings, and be sure that the bank is FDIC insured. Ask about minimum balances, overdraft fees, direct deposit, free checking, and online banking with your joint account.

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