When two people join together, in marriage or as partners, the first money move they often make is to merge their bank accounts into one joint bank account. While that can be an effective way to manage household cash flow, a joint bank account can also lead to relationship stress if control over money issues tends to be one-sided.
To make it work, couples have to be in sync on money matters with a willingness to share control and accountability. When all of the pros and cons have been considered, it is easy to open a joint checking account; but if things go awry, closing one can be a little more difficult.
What You Need to Know About a Joint Account
A joint checking account is simply the merging of two or more individuals’ finances. It is set up like an individual account; however, it can take deposits, allow withdrawals, and accept check writing from whoever is named on the account.
Each joint checking account holder has 100% ownership of the bank account, which means one person can withdraw the whole amount if he or she wants to. Similarly, if one person runs into trouble with the IRS, the entire joint bank account can be subject to a lien. When you make the decision to open a joint account the money is technically “yours, mine, and ours.”
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How to Open a Joint Bank Account
When deciding how to open a joint bank account, most of the process is the same as you would with an individual account. However, instead of just one person providing all of the required information and documentation, both people must provide it.
You will both need a valid ID, either a driver’s license, passport, or some other form of government-issued ID. If either of you is not a U.S. citizen, you will need to provide a government-issued ID from your home country.
You will also need to provide your Social Security numbers along with your date of birth, address, phone number, and email address. Some banks may require a copy of a utility bill to verify your address.
In setting up your joint account, you have a few decisions to make in terms of options. The first is whether to choose paperless statements. An increasing number of banks are willing to waive all or part of their account fees in return for issuing paperless statements.
You will also be issued two debit cards. You will need to decide if you want to opt in to the card’s overdraft protection. That is when you spend an amount that exceeds your balance. If you have overdraft protection, the bank will cover your non-sufficient funds, but you will still owe a non-sufficient funds fee. If you opt out, your debt card will simply be declined if there are non-sufficient funds.
Some banks issue an initial supply of checks for free. You will need to decide if you want to purchase a larger supply from the bank or purchase your checks from a third-party check printer, which is usually less expensive.
Once you submit your application, the bank conducts a quick background check to make sure you don’t have a history of bouncing checks. Once you are approved, you will be asked to read and sign an account agreement. You should read it carefully as it fully explains all of the fees associated with the joint account. With that, you should have immediate access to your account. You will also be able to access your account online, where you can make account transfers, pay bills, and track transactions.
Most banks require an initial deposit to open an account. Typically, the minimum deposit is $25 to $100. Whether you are opening an account at a branch or online, you can use a debit card or a credit card to make the initial deposit. For an initial deposit at a branch, you can also use a cashier’s check, money order, or cash.
How to Closer a Joint Bank Account
If, for whatever reason, you want to close your joint account, it usually takes both of you to do so. The bank doesn’t care whose idea it was to open the account or who deposited the most money; it considers both account holders to be 100% owners.
So, until both account holders consent to closing the account, it will remain open and accessible. Some banks require both account holders to be present together to close the account, which could make it problematic if the relationship didn’t end well. Some banks may only require a verbal consent by phone.
Joint accounts can work well for many people, especially when they need to manage a household together. But, it does require teamwork and trust. Since we are all individuals before we are couples, it might make sense to also maintain separate, individual accounts for discretionary funds that each person can manage in their own way.