A Step-By-Step Guide: How To Open a Joint Bank Account
Opening a joint bank account is a big decision.
It's not a requirement of marriage, but for some, it makes managing money much easier, and it helps keep both partners on the same page. Knowing how to open and manage a joint bank account is the key to a peaceful marriage and solid finances.
What Is a Joint Bank Account?
A joint bank account is an account shared between you and someone else. Traditionally, it's between spouses, such as a husband and wife, but you can have joint bank accounts with anyone. The money in the account belongs to both owners, and each partner has equal access to them.
How Does a Joint Bank Account Work?
Joint bank accounts work just like accounts you own yourself, whether it's a checking or savings account. The difference is that both account holders have equal access to the account information as well as the ability to withdraw money.
Neither partner must ask permission from the other to spend money from the account, as far as the bank is concerned.
For example, let's say you deposit $2,000 in the account, and your partner spends $1,000. The bank cannot stop your partner from spending it because each person has equal access.
These rules make it important to set expectations and guidelines with each other before opening a joint bank account.
For example, you may decide to open a joint account for shared expenses but keep individual accounts for personal spending. There's no right or wrong way to handle your bank accounts in marriage as long as you are on the same page.
Benefits of a Joint Account
If you're opening a joint account with your partner, there are many benefits, including:
It can be easier to manage shared expenses, such as housing and utilities
Increases the amount of FDIC insurance coverage because each person is insured for $250,000
It may be easier to budget and set financial goals together
Easier to transfer funds upon one partner's death with the other partner named on the account already
Things To Consider Before Opening a Joint Bank Account
Just as there are many benefits of opening a joint bank account, there are some downsides to consider, including:
Each joint account holder is equally responsible for fees and misuse of the account, including overdrafts
Creditors may be able to access the funds if one partner has an unpaid account that goes to court for settlement. Consult an attorney to understand your rights and responsibilities
It is challenging to hide surprise purchases or have independenceo when spending money
Either partner can drain the bank account without approval from the other
How To Open a Joint Bank Account
Opening a joint bank account requires careful consideration and these simple steps:
Step 1: Choose the Right Bank
Before opening a joint bank account, consider what you both want out of it.
For example, do you intend to earn interest on the funds, or is this a spending account that won't have money in it often? Do you need ATM access, online bill pay, or Zelle access?
Compare your options for different types of banks, both brick-and-mortar and online, to see which offers what you and your partner need without unnecessary fees.
Most banks have monthly fees, but they offer ways to waive them. Be sure you can meet those requirements so you can limit your monthly costs.
Step 2: Decide on the Type of Joint Account
After choosing the right bank, consider the type of bank account you need:
Checking accounts: These are best for everyday spending and household expenses. Most banks don't limit the number of transactions, and they often include a debit card to access cash or pay for purchases at the register.
Savings accounts: These are for short and long-term goals. The idea is to leave the money untouched. Some banks have limits on how often you can withdraw funds or offer tiered interest rates, favoring those with high balances with higher APYs.
Step 3: Gather Required Documents
You don't need many documents to open a bank account, but you must prove your identity and residence. Each account holder must present a government-issued photo ID.
For example, you could provide a driver's license, state ID, or passport. You can also provide a bill or bank statement to prove your current address.
Step 4: Submit an Application
Most banks offer online applications. You complete the information and then upload pictures of your documents. It takes only a few minutes to complete and open the account. If you prefer in-person support, you can visit a local brick-and-mortar bank and have a banker help you with the application.
Step 5: Fund the Account
The last step is to fund the bank account. If you open it online, you can make an electronic transfer from another bank account, mail in a check, or send a wire. If you open the account in person, you can also deposit cash.
Closing a Joint Bank Account
If you decide to close a joint bank account, you have a few considerations:
Discuss how you'll split the funds: Since they belong to both of you, be sure you agree on how you'll divide them before closing the account.
Make sure all withdrawals are complete: If you paid any bills or wrote checks recently, be sure everything has cleared, because once you close the account, the transaction will not go through.
Contact the bank: Each bank has different rules regarding how you close a joint bank account. Some allow one account holder to close it, and others require the approval of both owners. Check your account agreement to determine what you can do.
Decide where to move the funds: If you don't have another bank account to move the funds to, consider where you'll open a new account to hold the funds.
Managing a Joint Account
Understanding how to manage joint accounts is the most important factor in having one. Because each person has equal access, it's important to set rules before considering a joint account. Here are some ideas to get you started:
Access: Determine how much access each person can have without consulting the other. For example, a $20 withdrawal probably isn't a big deal, but a $2,000 withdrawal would be. Set a threshold for when you must talk to one another about the transaction before making it.
Responsibility: Decide which partner (or both) is responsible for balancing the checking account and paying bills. Some couples designate one person, while others share the responsibilities.
Transparency: Even if only one partner handles the account management details, both should have equal access to the statements and online portal to be able to understand the financial situation.
If you and your partner need help getting on the same page, schedule a free consultation!
FAQs
Can Unmarried Couples Open a Joint Bank Account?
No law states that you must be married to open a joint bank account. However, exercise caution before doing so.
If you separate, no laws will help you divide the funds unless you set up some type of legal agreement beforehand.
If you decide a joint bank account isn’t how you want to handle your finances at this moment, I suggest keeping individual accounts and giving each partner financial responsibilities for shared expenses.
What Are the Rules for a Joint Bank Account?
The rules of joint bank accounts are simple.
Each person has equal access and can make transactions, such as deposits, withdrawals, and transfers, as they wish. If the account includes a debit card, both partners will receive one, and each partner will be equally responsible for all activity, good or bad.
Some banks have strict rules regarding disputes and do not make any decisions until both partners agree. Some also require the approval of both partners to close the account, but some allow a single account owner to do it.
Who Owns the Money in a Joint Bank Account When One Dies?
Since a joint bank account is owned by two people, it generally goes to the other partner upon one partner's death. You don't have to worry about going through probate, and the surviving owner gets complete control over the account.
Does a Joint Account Need Both Signatures?
To open a joint bank account, both partners must sign a signature card that the bank keeps on file. This ensures that any transactions are approved by either owner if there is ever a question.
Opening a Joint Bank Account Is a Big Step
Opening a joint checking account is a big first step in combining finances as a couple. With two account owners, there is more risk in handling the funds, so be sure you are on the same page before combining your finances.
There isn't a rule that married couples must have a joint account, but if you decide it's right for your marriage, be sure there are clear rules and expectations in place.
If you need help having that conversation or figuring out how to share money as a married couple, contact me for a free consultation.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
