What You Should Know about Joint Accounts

You’re hoping to reach an important milestone in your relationship: opening a joint bank account together. Before you make an appointment with your bank, you should learn a bit more about joint accounts. It could help you make the right financial decision.

Joint Accounts Have More Insurance Coverage

If your bank is FDIC insured, your account deposits will be covered up to $250,000. This means that in the worst-case scenario, where your bank fails, your deposits won’t disappear. The FDIC will send you a payout to replace your deposits (as long as it’s within the maximum of $250,000). So, you don’t have to worry about losing your money.

Now, FDIC coverage is different for joint accounts! For joint accounts, you’ll have double the coverage since your account has double the contributors. This means that your FDIC insurance coverage is a maximum of $500,000 ($250,000 each).

Joint Accounts Come with a Unique Risk

With most joint accounts, accountholders are given equal access and control over the funds inside. Technically, they do not need the other user’s permission to make a withdrawal. This can be a problem if the other user empties the account without warning. The bank cannot stop the withdrawal from happening. You will have no legal recourse in this situation. The other user is completely within their right to make whatever withdrawal they want from the account.

Banks will often warn their customers of this inherent risk with joint accounts. To mitigate this risk of financial loss, you should only share an account with someone that you find trustworthy and financially responsible. If the person has revealed a history of breaching your trust or making impulsive financial choices, then sharing an account with them may not be the best plan. This could put you at risk of financial infidelity or economic abuse.

You can also mitigate the risk by limiting the amount of funds that you put into a joint account. For instance, if you’ve decided to share a joint account for monthly household expenses, only put the exact amount needed for those expenses — not your entire paycheck. Keep a separate bank account to hold the rest of your funds. This can protect you from “losing everything” in case the other user decides to empty the joint account without your knowledge. You’ll still have some funds that only you can access.

Joint Accounts Are Convenient for Emergency Funds

A couple that shares a household might want to create a joint savings account for an emergency fund. This would allow both of them equal access to the emergency savings, so either of them could respond to an urgent expense right away.

After all, if the emergency fund was a private account that one member of the couple could use, that could be a problem. What if the emergency occurred when they weren’t around? What if they were out of town or otherwise unavailable? The other person would have no access to the savings meant for the emergency.

If you ever can’t reach your emergency savings, and you desperately need to cover an urgent expense, don’t panic. You could use a credit card to temporarily cover the expense, or you could apply for an online loan. If your loan application gets approved, you can use the borrowed funds to quickly cover the expense. Find out how to try and get cash loans online so that you’re always prepared with this backup plan. Once you’ve used the loan, you can complete the repayment plan using savings from the emergency fund.

Having a joint account would circumvent this specific issue, allowing both members a chance to react to the problem when it arises.

Does a joint account still sound like the right choice for you and your partner? Then, it’s time to call up your bank and book an appointment.