Should You Open a Joint Checking Account?

Joint checking accounts can either be very useful or very stressful. They are great for multiple parties, whether it be with a spouse, a family member, or other owners of a small business, to be able to access the funds in the account when needed. However, both parties being able to take out money whenever can create tension if the withdrawal was not previously discussed with the others on the account. When the person realizes how simple it is to access the account, they may go money crazy and there is not much any of the other parties can do about it.

When creating a joint account, you are essentially signing a contract with another person that states you share the responsibility of the money whether you ever use the account or not. If you are not the one who is withdrawing all the cash from the account or the one making checks bounce, you are still held just as responsible. Many banks use ChexSystems to see your banking history. On this form, it makes no distinction between which person on the account did all the “bad spending.” Both names will go on record and your reputation at the bank could be ruined. Though it is possible for you to try and dispute the record, it will more than likely stay there for a full term of 5 years.

After hearing these circumstances, you may be reconsidering opening a joint account with whomever you had planned to. 18% of couples who are living together don’t have a joint checking account and 42% of couples who have a joint bank account also have a private account to themselves. Though there is a risk, it is slight, so you normally don’t have anything to worry about. Before opening the account, however, there are some things you should do.

Questions, Questions, and more Questions

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Creating a joint bank account without completely thinking it through is a bad idea. You should ask yourself why you need the account in the first place. If you have a legitimate reason, then you have nothing to worry about. On the other hand, if you and the other person are opening the account solely because both of you will have access to it, it may not be the best idea to open an account.

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If you are trying to take care of the household through the joint checking account, there are safer ways that limit what each party can do to handle the money. Dropping all your money all at once into a singular account can be risky. Finding other methods to keep your money safe while still being able to access it with ease may be the best option.

Just as in any other aspect of a relationship, there must be trust before opening the joint checking account. If you do not think you can trust the other party with your money, a joint account is a very bad idea. Getting to understand how each of you deals with finances is key to finding this trust, or lack thereof. Looking into the other person’s financial past is a way that makes their spending habits obvious. If you believe that you can trust that person with 24/7 access to your money, then a joint account should be no problem.

Terms and Conditions

If you feel as though you can trust the other person with access to your account, sitting down with them and establishing a firm set of ground rules is the next step in the process. Having this type of face to face interaction will make opening and maintaining the account a lot easier.

You should ask them what they would like to use the account for, set spending and transaction limits, and discuss any other details that you feel need to be brought up. After creating these guidelines, it is a good idea to write them down somewhere. In a month or two, you or the other person may forget exactly what the spending limit was: you think it’s $600 a month, they may think it’s $600 a week. That’s a big difference in monthly expenditures, so having a hard copy of the rules will be your reference.

If this talk seems to be going downhill and the other person does not seem to really enjoy reasonable ground terms, you may want to reconsider opening the account. If they can’t simply discuss the account that hasn’t even been opened yet, then it is more than likely that they will not use the account wisely. Having this talk with the other person is crucial to advancing to actually making the account.

Monitor the Account

Though you may have full faith in the other person, you should still keep an eye on your joint checking account. Today’s modern style of online banking and banking apps makes seeing your balance and transactions incredibly easy.

If you see an oddly large amount of transactions or a large sum of cash has been taken out, you should confront the other party. You should discuss with them if they made the transaction and why. There is a possibility it was not them and your account has been hacked. Keeping a close eye on the account’s balance will allow both parties to keep their trust in one another. If using an online banking option or an app, you can sign up for different alerts. Having an alert sent to you when a transaction larger than a certain amount was made or when a withdrawal in general is made will allow you to be on top of the account instantaneously.

Controls and Limits

Most joint accounts have the ability to place controls and limits on either one or both parties involved. Putting a ceiling on the amount that a person can spend at one time can prevent overdrafts and conflict over large amounts being spent. These limits will not only make sure the account’s other party is under control, but you as well. A joint checking account must be mutually managed by both you and the other party. You cannot be hypocritical and spend like crazy while they have a cap on their spending.

If both of you would like to still have a joint account but don’t want to put a limit on each other, opening separate individual accounts with your “spending money” is a possibility. The joint account can then be used to pay mutual bills and expenses.

In the End

Opening a joint checking account with another party is a very big financial decision. Before opening the account, you must ask yourself why you and the other person are doing it. You should also sit down and talk to the other person and write down some terms and conditions for the account before it is ever opened.

Monitoring the account will prevent both parties from breaking any of those terms. Setting controls on the account will also help keep the account in check. All in all, a joint checking account is very useful and convenient, but you should open one for the right reasons and make sure that the terms for it are being followed.

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