Setting up a joint account is a common and practical step that many couples take to simplify managing household expenses.
However, it’s important to not rush into this decision, as joint accounts can have long-term implications.
We spoke with Matthew Parden, CEO of the money management app Marygold & Co, who explained what a joint account is and outlined its key benefits and drawbacks.
What is a joint account?
“A joint account is a current account and unlike a sole account, which is in your name only, there are at least two parties attached to that account,” says Parden. “Joint accounts are usually set up by cohabiting couples who have commingled finances and require an account to receive contributions or income from both parties.
“They are usually used to pay bills and for general household spending.”
What are the benefits of setting up a joint account?
“The main benefit of a joint account is that it enables people to commingle their finances and have transparency around the contributions and income going in and the bills and expenses going out,” highlights Parden. “The transparency of this can help people manage their money more effectively.”
Joint accounts can also be very helpful for mortgages, for example.
“Rather than paying from two individual sole accounts, mortgage payments can come out of a joint account,” says Parden. “So, there’s obviously contractual reasons why there may be a joint account, which then has a consequential benefit of being used for joint finance generally.”
Are there any risks in opening a joint account?
“Some people don’t realise that there is a financial link between the parties to a joint account that can affect credit files,” highlights Parden. “So, if there’s an overdraft in that joint account, or the account exceeds the overdraft that’s in place, that can impact both people’s credit files, credit records and credit scores.”
In addition, having a joint account could put your money at risk if the other person makes unauthorised withdrawals or incurs debt.
“If there’s a lot of money in there, it legally belongs to both those people, so someone could empty it,” says Parden. “For example, if your relationship goes sour, someone could in theory take all the money out and it might be difficult to get back.”
If you want to suspend your joint account, the first port of call should be the bank that holds the account.
“You would have to get in touch with the bank and notify the bank of the fact that there’s no financial connection anymore, and the desire to freeze that,” says Parden. “But it’s quite possible that, if there was a breakdown, that the money could have gone already.”