8 things you need to consider before signing up for a joint account
Money can be a source of various conflicts for many people who are in relationships. It’s important, therefore, to come up with a financial strategy that works for both parties involved. Having a joint account may be advisable for those individuals who want or require more than one person authorized to use a bank account, but they will need to know what things they should consider first before deciding if this is the best recourse for them.
What are the things you need to consider before applying for a joint account?
Here are 8 things to keep in mind:
1. Communication will be crucial.
The money in the joint account will of course belong to both of the authorized persons – to both of you. Each of you will be responsible for keeping track of any money that comes in and goes out of the joint account. This means that you equally share responsibilities in keeping up to date with any changes in your account. If one fails to communicate the changes and it shows up in the record, it may cause some serious problems, because expectations have not been set.
It may be difficult – but not impossible – when two individuals have access to one account. It just means the two of you really have to communicate to make sure things are in order.
2. Savings and expenses will be equally divided.
Having a joint account also means that you both share whatever savings or expense you will have. This is beneficial if you have the same amount that you are putting in to pay for the same rent, same utility bills, and so on. Every transaction will be recorded so it will be easy to compute and verify. If you think that there are any errors in the record, you will have to check with the other person first to know if there were any transactions that were failed to be mentioned beforehand.
3. Both authorized signatories’ credit score will be affected.
Both of your names will be in the joint credit card account and you will have the same capacity to make charges to a credit card. All of the card’s history will be integrated on both persons’ individual credit report.
If one of the joint users that has bad credit is added to the joint account, the bad credit will be neutralized and perhaps be able to obtain a better credit card. This will only be possible if the credit card is used properly, the bill is paid when it is due, and the balance is kept low.
4. Both credit card application and interest rate will be affected.
A joint user of an account will find it easier to apply for a credit card when it was difficult before. This is particularly useful for those who have had a bad credit record and have high-interest rates on their individual accounts. Obtaining a joint account will allow that person to leverage on the other joint user’s good credit record to obtain a credit card easily or lower the interest rate.
5. Both authorized signatories are legally responsible for any payments.
While in individual accounts, you are only responsible for your own finances, in joint accounts, you will also be responsible for the other person’s money and debt. So if there should be any delinquent payments on the other joint user’s part, you will still be legally responsible for it – even if these delinquencies are not your fault.
The issuer of the credit card can go after either cardholder for the payment because both of your names are in one account. They can have legal actions taken against you, or both of you, for any charges you have or might not have made.
6. Credit card conflict can cause relationship problems.
Arguments are to be expected with joint accounts when communication is put aside. If there were any transactions that have been made without the knowledge of the other, it could give offense. For instance, if one has made a purchase that is not acceptable to the other joint user, and it has not been informed to him or her, they will have some trust issues in the future that will strain their relationship. It could be personal or business – for whatever purpose it is – inconsistency in the joint account will cause some relationship problems if not managed well.
7. Separation, divorce, or death will make it difficult to manage the joint account.
You will be held liable for any responsibilities in the original credit card agreement even in the unfortunate event of separation from, divorce from, or death of the other joint user. In cases of separation, it will be hard to communicate any transaction or due payments on the other joint user’s share, if you severe ties with that person.
In cases of a divorce, you will still be held liable even when the divorce agreement says otherwise. This means that if your partner isn’t putting in his or her share of bill payments, you will still be affected. In cases of death, you will take over full ownership of whatever accumulated savings or debts you have in the joint account.
8. The joint account can be used as a medium to manipulate the other.
This should not be the case, but it happens to some people, most especially to those that are in troubled personal relationships. One uses the credit card of the joint account to put a stress on the other. For instance, a joint user can go on a spending spree without any intention of paying for it, leaving the other person to cover the bill. If the other person refuses to pay, both of them will be held accountable. This would not matter for the other person who splurged if he or she already has bad credit in the first place.
About the author
Ally is part of the team that manages Home Loan Finder, a free home equity loan and home loan interest rates comparison service in Australia. Before joining HLF, she was a Media Planner with McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.