Joint bank accounts

Sharing a joint account with family and/or friends can be convenient, but make sure you know the pros and cons of shared banking before pooling finances.

Key points

  • Joint accounts can be useful, but think very carefully before tying your finances to anyone else's
  • Ensure the account mandate gives you the safeguards you need
  • Consider possible impacts on the credit ratings of all account holders

A joint account is a current account opened in the names of two or more people who will all be able to pay money into it and withdraw from it - although this can be controlled with a mandate (see below).

It doesn't have to be your only bank account - you could, for example, have a sole current account in your own name and a joint account you share with your partner.

A shared current account can be convenient for those who are organised and trustworthy - but they're not without their drawbacks.

Who are joint accounts for?

Joint bank accounts were traditionally used by married couples and those in a trusting relationship.

The simple reason for that is there's a certain level of trust you need to have in someone before you give them free access to your money.

Yet these days, with so many people living in shared accommodation without being romantically involved, joint accounts have gained popularity amongst groups of peers who need somewhere to pool their bill money.Wallet

Joint bank account mandates

When two or more people open a joint account, they'll be asked to sign a mandate.

A mandate is a form which sets out which of the account holders can do what, such as signing cheques or withdrawing money, and which actions require the authority of more than one, or all, account holders.

Before signing the mandate, it's very important to check it includes everything you need it to.

Who manages a joint account?

The mandate will set out what account holders can do individually and what actions need their collective agreement.

When you open the account, make sure the mandate spells out what each account holder can do
Matt Sanders, Gocompare.com

Joint accounts aren't always managed equally - sometimes there'll be a 'lead' account holder who can perform more actions on the account without the agreement of other account holders.

Unless you agree otherwise with the bank, every account holder will receive their own statement.

Any credit agreement set up on the account must be agreed by all the account holders - this would include any overdraft facility. This is because all of the account holders would be collectively responsible for any debt.

If an unauthorised overdraft occurs, the bank should tell every account holder.Pound coins and a £5 note

"Joint accounts can be an efficient way to handle household banking, but make sure you understand what you're signing up for," said Gocompare's Matt Sanders.

"When you open the account, make sure the mandate spells out what each account holder can do and, if you don't trust the other account holders 100%, ask that any outgoing transactions have the authority of everyone.

"If there's a problem, cancel the mandate without delay and complain to your bank."

Joint account benefits

If you and your partner or housemates all contribute a share of bills, a joint account can be a convenient way to manage this.

If there's any lending attached, choosing the person with the best credit rating to be the main account holder might give you a better chance of success
Matt Sanders

You simply all pay your share of the bills into the joint account and set up direct debits with the billing companies to take the money out when it's due.

Because everyone gets a statement, it's easy to see how much everyone is paying and should save arguments over some people contributing more than others.

If your credit rating is less than perfect but your partner's is much better, you could get a better deal for credit through a joint account.

"If there's any lending attached, choosing the person with the best credit rating to be the main account holder might give you a better chance of success," said Sanders.

Read more about accounts for managing shared household bills in our dedicated guide.

Drawbacks of a joint account

You need a certain amount of trust to share your finances with someone in a joint account - you're potentially allowing someone else to use, or misuse, your money and personal information.

Did you know...?

  • Your bank may use your personal account to cover a joint account debt if the products are held with the same provider

If the joint account is used for your day-to-day banking as well, the other account holders will see how much you earn and what you spend your money on.

Also be aware that, if you have a personal account as well and it's at the same bank as your joint account, the bank can transfer funds from your personal account to cover a debt on the joint account.

Under new laws enacted in 2015, HMRC can also seize funds that are owed for unpaid taxes from joint accounts, even when only one account holder owes the money.

The government says that it has included safeguards to ensure that, in such cases, only a pro-rata proportion of the balance will be taken from a joint account.

When joint accounts go wrong

If there's a disagreement on your joint account, the first thing to do is to cancel the mandate, as this will freeze the account.

Remember!

  • Those you share an account with will appear on credit reports held on you as a financial association

Once the account is frozen, all account holders have to agree on how to divide the money or debt. If they can't agree, the courts may have to decide.

In England and Wales, it's assumed the account holders own the money equally if they all pay money in, regardless of how much each of them deposited.

What's more, if the account holders are married or civil partners, it's assumed the money is owned equally by them both, even if only one of them pays in.

In Scotland, it's assumed the money belongs to whoever paid it in, whether account holders are married or not.

If there's a problem with your joint account and you're not happy with how your bank has dealt with it, first make a complaint to the bank.

If you're still not satisfied, you can ask the Financial Ombudsman to look at your case.

Joint accounts and credit scores

With any type of joint account, there's one very important thing to remember - those you share an account with will appear on credit reports held on you as a financial association.How to improve a credit score

In some cases, having a financial association with someone with a poor credit record could mean you're turned down for credit because the lender may check their credit rating as well as yours when making a decision.

Because of this, it's up to you to make sure the person you want to have a joint account with is financially responsible and that you trust them.

If you check your own credit report and find it contains a financial association that's no longer correct, you can ask the credit reference bureaus to remove it.

Other sorts of joint account

Although joint bank accounts are the most obvious type of shared account, there are some other financial products that can have more than one account holder.

Did you know...?

  • It's not possible to take out a joint Isa account as annual, tax-free savings allowances apply to individuals

Mortgages and loans

One of the most common ways that people end up sharing an account is if they take out a joint mortgage, often with a partner.

All mortgage holders are equally responsible for repaying the mortgage, even if someone moves out.

Because of this, though it sounds grim, it's a good idea to draw up an arrangement for what happens if a relationship breaks down.

It's the same with loans - you're jointly responsible for the debt, so if one person stops paying, loses their job or dies, you could be saddled with paying it off.

There are income protection insurance policies that can help cover these eventualities.

Life insurance

Joint life insurance policies are common for couples, but whether such an option is better than two individual policies will depend on your particular circumstances.

Savings

Joint savings accounts can operate similarly to a joint current account, with a mandate to state whether withdrawals can be made with a single account holder's signature or only with the agreement of all account holders.Income protection

Couples can't get joint Individual Savings Accounts (Isas) as they each have to hold their own account with its individual tax allowance.

Credit cards

You can't get joint credit card accounts in the UK, but sometimes you can have an additional cardholder added to your account.

You'll need to trust someone to do this, as the main cardholder is responsible for the account, including debts run up by additional cardholders.

By Derri Dunn