Why Opening a Joint Checking Account Smells like Trouble in Paradise (& How to Avoid it)

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A joint checking account is not some way to prove a couple’s dedication and devotion to the relationship. It is something way beyond—a moral (and legal) transaction in which the joint account nominees agree to pool their money together.

The concept of joint checking account sounds lucrative and mutually understanding. In the case of couples who are married or living together, people see it as a “progressive step”. But this controversy has brewed up tonnes of quarrels.

Before we get into the quarrel-factor, let’s understand what a joint checking account is.

What is a Joint Checking Account?

A joint checking account functions just like a normal bank account, but unlike a single-user bank account, this one has more than one user. Joint checking account’s utility doesn’t begin and end with couples.

Many parents open up joint bank accounts with their kids to provide them much-needed banking experience. Joint bank accounts are the best way for people to cater to their parent’s needs, and of course, for a family to pool up their funds.

But joint bank accounts are most commonly used by—you guessed it right, couples who pool up money to cover joint expenses of theirs. Monthly mortgage, rent, electricity bill, and food are some of the best places to put it to use.

There’s always a controversy in case of joint checking accounts. Because a joint checking account is accessible to two/more people, each one of them enjoys the owner’s rights.

Money is the numero uno cause of lover’s quarrels and two people pooling money at one place doesn’t make it better. Joint checking accounts give liberty to both partners to withdraw cash, pay bills, swipe credit cards and splurge shop any time.

It’s all Fair in Love and Joint Accounts

We aren’t saying that joint checking accounts are bad from the relationship perspective, but it’s about how open you are as a couple. Be it a live-in relationship or the sanctity of Marriage, opening up to each other is important.

Especially in case of marriages, where everything is yours as much as it is your partner’s, all the money in the joint account belongs to both of you. You can use all that money as much as your partner can.

This is essential because shared expenses can be easily paid off without dividing into two, and both partners are pooling money up do so. But this has serious repercussions too. Let’s look at the pros and cons of having a joint bank account.

PRO TIP: In case of live-in relationships, we advise not to go for a joint checking account. No laws protect unmarried couples’ assets. It’s better to link accounts as a beneficiary for easy money transfer.

If you move into your boyfriend or girlfriend’s house and pay half the mortgage for five years and then you split up, you have nothing but your boxes out on the curb and they have equity in their home.

Pros & Cons of a Joint Checking Account

Pros

  • A joint checking account gives partners equal ownership. Each owner has the liberty to withdraw and deposit funds without others’ consent/approval.
  • In regular situations, a single person’s checking account is insured for $250,000 by FDIC and NCUA. But a checking account owned by two people doubles up the insurance amount to $500,000.
  • Finances are simplified with a joint checking account. Shared expenses like rent, bills, date nights and food are paid from the joint account.
  • While one owner can close the account with other’s consent, a joint account co-owner cannot remove partner(s) without their approval.

Cons

  • You share the good and bad, so there’s joint liability. Many partners link their recurring bills to joint checking accounts, scaling up chances of an overdraft. If your money goes down, there’s no individual protection to save your skin or money that your partner spent.
  • In the case of joint checking accounts, you might not make the cut to benefits, grants, and even loans. Many college students have been denied financial aid because of padded accounts joined with their parents/guardians.
  • If your joint account partner doesn’t pay down debt and debt-collectors call, the debt will be collected against your joint account. You’ll lose your share of money in the joint account.
  • If a co-owner (other than your spouse) withdraws more than $14,000 every year from the joint account, it’ll be treated as a gift by the IRS, subjecting it to Gift Tax.
  • In the case of Divorce (or split-up), the joint account will be active. When your ex-partner adds a new co-owner, s/he’ll be able to access the account too.

Tips for a Healthy Joint Account Relationship

We can’t let money get in the way of what happens between us and our joint account co-owners. It’s crucial to keep a few things in mind so as to ensure that your joint checking account doesn’t get in the way of love:

No matter how mutually understanding your relationship is, use joint checking accounts only for shared expenses and collected savings. No individual credit card payments, Laptop EMIs, or Beauty box Subscriptions—nothing of that sort. It’s a mutual account and should stay that way.

Decide on your roles and work on it. If one has decided to balance books for the month, then another should keep track of all shared expenses. Be it a coffee date or a lavish dinner; mention everything that goes from your account.

Most importantly, be honest. It takes two to tango and a joint checking account works on the honesty of both. Even if you feel that you need money from your joint account for personal use, talk to your partner(s) about it before making a move.

Sleep on the Same Bed—but Pick Your Sides

Yes, joint checking accounts are very much part of a healthy relationship. In fact, it’s a must to have a joint checking account with bae, but it shouldn’t stop at that. You don’t want your paycheck to come into your joint account.

That is why most experts agree it is best in a committed relationship to have a mine, yours and ours. Your personal checking account should be primary and the designated shares should be transferred from there.

By doing so, you avoid the appearance of not trusting your spouse, even if you don’t. Each of you agrees beforehand to put a certain amount, or a percentage of your paycheck into a joint checking account to pay bills.

You may also want to open a joint savings account to save for purchases like a house, car or vacation. In this way, your primary concern is taken care of. You don’t have to worry about getting cold stares from your partner when you make discreet purchases, which you might in case of paying with a joint account.

Love > Money

Your relationships matter more than anything in the world. Opening a joint checking account should not be the breaking point. If your partner is fussy about transferring all money in the joint account, try to explain him/her that it’s not viable.

A joint checking account has real utility, brings out the couple goals, and can help in millions of ways. But remember not to put all your eggs in a shared basket!

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