Reviewed by Sep 30, 2020| Updated on
Meaning of a Joint Account
A joint account is a bank account, which is shared by two or more individuals. Families, spouses, or business partners who have a degree of familiarity and confidence with each other are more likely to use joint accounts. It normally allows access to funds inside anyone named on the account.
There are many ways to set up accounts, each with its own consequences about how money or assets can be accessed within the account or how the account material is treated after one of the joint holders passes away.
How Does it Function?
Joint accounts operate much like normal accounts, so require two or more registered users to have them. They can be permanently created, such as an account between a couple to deposit their salaries into. These can also be temporary, such as a short-term account between two parties that contribute funds.
A bank account held jointly by two parties may be named with an "and" or an "or" between the names of the account holders. Unless the account is classified as an "and" account, both parties have to sign for access to the funds. If it is an "or" account, then it is sufficient to have only one party sign to access the account balance.
Jointly owned accounts include bank deposit accounts, such as credit cards, checking and savings accounts, and other financial products, such as mortgages, loans, and credit lines (LOC). The joint status will authorise the full use of all those specified on the record, but also the liability for any expenses, fees, or charges incurred.
Opening a joint account is as easy as opening one single account. When the account is open, both parties should be present at the bank—whether it's a savings account or another product, like a mortgage or loan.
Pros and Cons of a Joint Account
Joint accounts can be beneficial and offer a range of advantages for their holders. Many accounts require minimum balances, particularly if they wish to access the benefits of a particular form of account. Two people can circumvent this condition by pooling their money together and enjoy the account benefits.
Additionally, opening a joint account can be very beneficial for younger couples who are at the stage of merging their finances in relation. They may find it easier to have a single account to deposit their paychecks into and make payments for their rent or mortgage, taxes, or other joint debts.
Nonetheless, joint accounts may cause some big headaches, as they usually offer unrestricted access to the funds to both parties. It is especially true if one group is more cynical with money than another.
For example, if one partner doesn't seem to regulate their spending habits, it will impact the other partner who may be more frugal. If they are listed as a joint account holder, the frugal spouse can not dispute the other spouse's withdrawals or transactions with the bank.
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