Whether you’ve decided to share all your money in one joint account or have joint and separate accounts, the fact is that most couples do have some of their money in a joint account. How do they work?
What is a joint account?
It may seem obvious what a joint account is. It’s an account where more than one person can have access to the money in it. If you’re opening an account with your husband, wife or partner, it would be set up so either of you could take out money and pay bills without the other one having to sign or agree to it.
SAVVY TIP: With any joint account that has an overdraft facility — or any joint loan – each of you is responsible for any debts that are run up on the account not just half the amount or debts you’ve run up individually. It’s not normally an issue but it could become one if your relationship breaks down or if one of you goes on a serious spending spree (especially if it’s one you can’t afford).
Opening a joint account
Before you can open a joint account, you’ll need to be credit checked and provide identity information. You can either convert an existing account into a joint one or open a separate account.
SAVVY TIP: When you open your joint account, you’ll be asked to sign a ‘mandate’ or ‘authority’, which sets out the terms of the account. You can set up the account so you both have to sign every time you spend money, but if you don’t trust your partner not to run off with the cash, you probably shouldn’t be opening a joint account with them in the first place!
Both of you will need to provide identity information (unless you’re converting an existing account). This normally includes:
1. A passport (possibly with a visa if it’s not from the UK/EU or EEA) or photocard driving licence.
2. A credit card or bank statement, but not if it’s been printed off the internet, utility bill (if it’s less than three months old) or a council tax statement for the current tax year for proof of address.
SAVVY TIP: You’ll each be given a debit card and a cheque book (if the account comes with a cheque book) and you’ll normally be offered an overdraft facility, depending on your credit history. If you only use the account to pay your rent or mortgage plus household bills, you shouldn’t need to go overdrawn, so keep the limit low. And if you have an overdraft facility on your own personal accounts, there’s a safety net (albeit a costly one) if you need to borrow.
Questions to ask the bank:
1. How will you contact us if the account goes overdrawn?
2. Can one person freeze the account or does it need the consent of both of us?
3. Can one of us un-freeze the account or do both of us need to agree to it?
SAVVY TIP: Some women have found – to their cost – that their bank will let one partner freeze the account, but will insist that both agree before it can be unfrozen. If your relationship breaks down and it’s not amicable, that could cause serious problems if you can’t get access to money that’s there.
4. What happens if there’s a dispute and we want to make sure both of us have to sign to agree transactions?
SAVVY TIP: If you want to change the basis on which your joint account is operated, you’ll have to get in touch with the bank or building society. Normally the bank will cancel any transactions that take place after you’ve told them there’s a dispute, unless both of you agree to them.
Running your account
Don’t assume that you and your partner will have the same ideas about what your joint account is for. It’s worth having a conversation about it so you can draw up some ground rules. You may think you don’t need to discuss it, but it’s a useful exercise if you and your partner have different money habits or you’re not very good at talking about your cash.
Questions to ask each other:
1. Do we want to use our joint account for mortgage and household bills only?
2. If it’s for more than household bills and mortgage, are we happy for it to be used for personal spending?
3. Who is going to take responsibility for checking statements etc?
4. If the account has an overdraft, what’s it to be used for?
5. What should happen if the joint account is overdrawn?
There’s a section called understanding joint accounts on the British Bankers’ Association website and a guide called you and your joint account which you can download (the download button is towards the bottom of the page).
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