Joint accounts have their uses but beware the hidden pitfalls
Thinking of taking out a joint account? Vicky Shaw shares some tips to help you know what’s involved before signing up
If you’re in a serious relationship with someone, you might have talked about the possibility of getting a joint account to pool your savings and manage everyday cash.
These accounts can be useful, but new research suggests many people are in the dark about exactly how they work.
The research, from website SavvyWoman.co.uk and M&S Bank, found many of those with a joint account admit they didn’t read the small print when they signed up to it – and there’s also confusion about who’s liable for debts when couples split up.
So here’s a guide to how joint accounts can help with your finances – and the pitfalls to watch out for. How do joint accounts work? Either person can use the account, although, depending on the terms, you both may need to sign when money is withdrawn. Joint accounts allow the account holders to decide between themselves how money in the account is used and how any borrowing on it will be paid back. What are the potential benefits? They can make it easier for a couple to manage the money they have coming in and going out every month, in one place. A joint account could also be a useful way of paying bills. And it may be possible to boost the amount of interest you earn by having one larger pot of cash rather than two separate smaller pots. What could the pitfalls be? Many people don’t realise they could be pursued for the full debt run up on a joint account, not just a proportion of it. The research found three-quarters (74.1% ) of UK adults don’t know each person is liable to pay the entire debt on a joint account and that the bank or building society may pursue either for the full amount. Nearly half (46%) wrongly think that if they split up, each person is only liable to pay half the debt. And over one in 10 (11.9 %) wrongly think only the person who runs up the debt is responsible for paying it. Will having a joint account affect your credit record?
Credit reference firms may create a financial association between both account holders. This could be positive or problematic depending on the other person’s credit history. This association could affect your ability to take out credit in the future.
What should you consider before opening a joint account?
It’s vital to make sure you understand all the terms and conditions. The survey found that over four in 10 (42.3%) people with a joint account didn’t fully read the terms and conditions their bank provided.
Sarah Pennells, founder of SavvyWoman.co.uk, says: “Thousands of couples open joint accounts each year and I’ve been concerned for some time that many of them don’t know what they’re signing up to.
“If a relationship breaks down, one partner can be left with debts of hundreds or even thousands of pounds.”
So if you’ve got doubts about how the other account holder may use the joint account, it’s all the more important to think carefully about whether a joint account is the right option for you..