Joint checking accounts provide customers with easy money management for a plenty of different relationships, such as parents and their adult children, married couples, live-in couples, etc. Even though joint checking accounts offer convenience, they bring some potential risks with them. This is why you should read the terms and conditions of the said bank, before you go for a joint checking account.
We have listed the 5 important things associated with joint checking accounts. Everyone should be familiar with these crucial points, before they venture into a joint checking account. No matter whether you open your joint checking account with your spouse, adult kid, parent, or just a regular partner, being aware of these things is important.
No withdrawal accountability
Joint checking accounts do not come with a liability for withdrawals. This is a major problem with couples, where one spends too extravagantly and the other is frugal. A couple opens a joint checking account, when they share their expenses and home.
Both the partners should know that spending their money at the right place is important. If one of the partners spends the rent on a lavish vacation in Vegas, then the other partner too has to suffer its consequences. This shows that if one person is erratic with money or is planning to break-up the relationship, then a joint checking account can prove to be in danger.
Furthermore, when a parent opens a joint checking account with their adult child, then also the situation can become unfavorable. For instance, if the adult child is unscrupulous and withdraws lump sum amount of money.
The child may propose to be a part of their parent’s checking account, saying that they can help pay bills and prevent any scam on the account. However, since both account holders can pull out money, the parent would have to bear the burden of a deceptive child.
Financial mistakes of the other person can ruin your account balance
In a joint checking account, both account holders have equal rights. This means that along with the benefits, both members also share the financial errs. For instance, if one account holder has unpaid debts that lands into collection, then the creditor can use the funds in the joint account to pay off those debts. In such a scenario, your joint checking account can be completely used up to satisfy the debts of your co-owner.
Additionally, if a legal judgment is passed against one co-owner of the joint checking account, then the other owner too has to bear the brunt of the charges, that is, the money will be considered as a portion of the assets of the accused. For example, if an adult child is sued, then their joint checking account with their parent is deemed as the child’s assets, albeit the account was initially in the name of the father.
Your account can be closed without your consent
Although, some banks ask for the permission of both parties to close their joint checking accounts, most of them do not. Generally, according to the state laws any person who writes checks on the account has the right to close the account any time, irrespective of the presence or awareness of the co-owner.
Even though, this is beneficial in some cases like when one party relocates, dies, or becomes crippled, it can also result in potential risk if the co-owner just drains the funds, closes the account, and vanishes. Thus, you must ensure that the person with whom you share your joint account is trustworthy.
Your credit scores can diminish
A joint checking account can hurt your credit report. Even though your kid’s or spouse’s credit rating does not hit your credit score, the way in which they manage their money can hurt your credit rating, when you share a joint checking account with them.
Creditors report the information of the joint checking account. Therefore, if one account holder struggles with paying bills on time and debt, then it can ding the credit score of the co-owner, unless the money is handled properly.
You can become unqualified for financial assistance
If any of the account owners of the joint checking account wants to be eligible for any type of financial assistance, such as Medicaid, college financial assistance, etc., then the money in the joint account is incorporated for the qualification of the financial aid. This means that you may not be eligible for the financial assistance, if the co-owner of the joint account has more cash as compared to your cash, when you are the only account owner.
So, these are the 5 distinct facts about joint checking accounts. Being aware of these points will prove to be advantageous for you as well as the person with whom you open your joint checking account. Plus, when you know what you are signing up for, you can rest assured that you will not suffer any joint account related headaches later on.