Risks and benefits of joint accounts

One account, two names

Opening a joint account with your partner is a huge commitment and one of the biggest decisions you will make in your relationship. Only do it if you completely trust them to responsibly access the money, in good times and in bad.

Here are some tips to work out if a joint account will work for you.

Risks of joint accounts

Joint accounts are only suitable for people who trust each other deeply, like a family member or your long-term partner.

In most cases, your partner can withdraw all the money at any time, as they do not need to seek the other partner’s permission for withdrawals.

Be wary of anyone pressuring you to open a joint account. People do have money troubles and may see you as a way to help solve their financial problems.

If you open a joint account which offers credit, and one account holder racks up a large amount of debt they can’t pay back, you both risk having a bad entry on your credit report. You are also legally responsible for paying off the debt.

Benefits of joint accounts

People often open a joint account because they pay fewer fees with one account than two. It can also make joint payments like mortgage, rent and other bills easier to manage.

Joint accounts work well for people who spend money in a similar way. Both people should agree how and when they will deposit and withdraw money, to meet the same goals.

If you are thinking of opening a joint account, ask yourself:

• Do I trust the other person completely even if times get tough?
• Do we communicate well about money matters?
• Do we have similar goals for our money and similar spending habits?
• What is our objective in opening a joint account? Is there a better way to achieve this objective?

A shared account for shared bills

You may want to keep your money in separate accounts but open one shared account for your shared bills. Discuss with your partner what bills you will pay with your shared account and how much you each will contribute.

Types of joint accounts

There are two types of joint accounts.

Both to sign

This type of account only allows transactions to be made when both parties sign.

Either to sign

This account allows both parties to transact independently of each other.

Additional credit cards on your account

Your bank may offer you the option of having additional cards for family members. These are not strictly joint accounts and the primary card holder is usually solely liable for the debt.

Closing a joint account

Follow the steps below to close your joint account properly.

1. Both owners need to agree – If you cannot agree to begin with, contact your bank to advise them of a dispute between the two of you. They may be able to freeze or put a temporary stop on your account until you are able to resolve this, or they may require both of you to authorise transactions on the account.
2. Sort out direct debits and credits – Ask your bank for a 13-month list of any direct debits and credits for your joint account. Contact your employer and anyone else who regularly puts money into your account, including Centrelink, to tell them of your new account. Cancel all direct debits from your joint account and make alternative arrangements to pay these bills.
3. Zero balance – Pay off any overdrawn amount and work out with your former partner how you will divide the remaining account balance. Your balance must be zero before you can close the account.
4. Call your bank – Tell them you would like to close the account. They will need to verify both owners’ identities. Take note of the date and time you called, and the name of the customer service officer you spoke to.
5. Put it in writing – Follow up your call with a letter confirming you want to close the account. Include your joint account details, both signatures, and details of your phone call. Ask for written confirmation that the account has been closed. Keep a copy of your letter in case there are any issues later.
6. Confirmation – You should receive confirmation from your bank once the joint account has been closed. This could be a letter or a final statement. If it does not arrive, follow up with the bank.

Think very carefully before opening a joint account. Communicate openly with the other person to make sure you both have the same financial goals. Don’t be pressured into opening a joint account as you could lose your money.

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