When I first told people I was getting married, the one question that everyone asked, besides whether my wife was pregnant, was whether we were opening a joint back account.
Don’t get me wrong, I’m not against the idea of a joint bank account. There are benefits, for one they can help people manage their finances more effectively, but there is a part of me that likes to account for everything I spend and knowing what is being spent and when forms a big part of this.
I have gone away and asked myself a few questions why, to this date I am still so reluctant to put pen to paper and make that commitment.
#1 What is a joint bank account?
Quite simply a joint bank account is one that two or more people have access to. They’re common amongst married couples, civil partners and people who cohabit. They might also be opened by students house sharing, If there are any students reading this, I personally wouldn’t recommend it.
#2 Considerations of a opening a joint bank account
Opening a bank account isn’t something that should be taken likely. It can affect you positively or negatively and is a huge financial commitment.
Below are some of the considerations that you might want to consider:
- Does the person that you want to open a joint account with have good credit?
- Do you trust the other account holder without question?
- What is the money going to be used for?
- Is it going to be an account that both account holders have open access to?
- What will happen to the money if you split or no longer need the account?
In opening a joint bank account there are issues that might present themselves that are not necessary in your control.
It’s a question that we all avoid, but what is going to happen to the money in the account should one of the account holders die or loses capacity to manage their own finances. Money held in a joint bank account automatically passes to the other account holders. The bank might want to see a death certificate to enable them to transfer money to the surviving joint owner or owners.
When someone loses mental capacity the bank might freeze the account, so before opening an account you might need to consider whether it is worth setting up a Lasting Power of Attorney, if you don’t do this you could face the possibility of having to spend a lot of time on administration and a lot of money applying to the Court of Protection to become a Deputy.
#3 Does having a joint bank account affect my credit score?
Experian, the credit reference agency, state that having a joint account or another financial commitment will not directly have an affect your own credit score.
Be warned there is a caveat. In opening up a joint account they become what is known as a financial association, great if your credit score isn’t that great, as being associated with someone with a good credit score might actually improve your chances of getting credit. If you had done your best to improve your credit score or generally just had a good credit score, association with someone with bad credit might actually make it more difficult for you go get credit.
So what is stopping me opening a joint account?
My wife has a good credit score, she has always paid her debts on time and didn’t have many overheads before we met. If we did open a joint account this would unlikely affect any application for credit, whether it be an application that I made personally or one that we made jointly. In any event we already have a joint mortgage so we are already financially associated with each other.
My own credit history is not bad either, having always paid my debts on time, so even if my wife did have a bad credit history this still shouldn’t affect the outcome of any application that we make in the future so you could say that there is no reason not to pool our finances together.
The thing is my wife is like Augustus Gloop from Charlie and the Chocolate Factory and gets excited at the slightest mention of a trip to the shops, no matter whether it is for food or clothing and whilst I’m more of a saver than a spender, I wouldn’t want to stop her buying what she wanted so long as she can afford it and all our bills are paid first.
So for now at least, I say if it isn’t broke, don’t try and fix it. We’ll be keeping our accounts separate spending what we can afford when we want.
- Don’t rush into opening a joint account
- Consider why you want to open a joint account
- Make sure that the bank account offers what you need, don’t pay fees if you don’t need to