Have you realized that you're in a relationship for the long haul, and you've begun to manage finances together with your partner? You might be wondering if it's time to get a joint bank account, but don't know what that entails?
Below you'll find a guide that will answer all the questions you have regarding a joint bank account in Canada. After reading through, we hope you'll have the information you need to move forward with opening a joint account.
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What You Need to Know
There are several differences that you need to know about having a single account vs. a joint account. The main difference is that everything will get named under and operated by one person in a single account.
For example, when you look at checks from a single account, there will only be one person's name on the checks. There will be two people's names listed as the account holders when you have a joint account.
This means that both partners can access the account. In a joint account, one partner cannot remove the other from the account.
If there is a check that needs to get deposited or cashed, either of the account holders is able to do this for a joint account.
If you wish to close the account, both account holders will need to provide consent and sign the necessary forms to close the joint account.
What Are the Advantages of A Joint Account
There are several benefits of joint bank accounts that you need to know, including that it makes it easier for you to access funds in the event of an untimely death or injury of your joint account holder.
If your significant other only had a single account, in the unfortunate event of their death, their account would get frozen. This means you wouldn't be able to access the money to do things like pay for their funeral or cover any debts.
Another benefit of having a joint account is it helps you get to know your partner better. If you've just entered a new marriage, you might not understand the way your partner spends money 100%, but this account will help you gain a better grasp on areas where both parties can improve when it comes to their handling of finances.
Having a joint bank account helps to strengthen the bond you share with your partner. The reason being is it's a representation that all money earned between the two of you truly belongs to you both.
It shows that you're thinking as a couple and not thinking as individuals.
Lastly, it makes it easier to pay bills because each check earned from both people will be deposited into the account. When it's time to pay bills, instead of scrambling to figure out what money needs to come from each account, it will come from the same place.
What Are the Disadvantages of A Joint Account
Although there are several advantages to opening a joint bank account, there are also some disadvantages we're going to share with you. If you and your partner decide to go your separate ways or get a divorce, things can become challenging.
When couples separate, dividing money between the two that was in a joint account is difficult to do. Another disadvantage is for those that don't want their partner knowing about everything they purchase.
Anytime a purchase is made using the joint account it will be there for each partner to see. It can be embarrassing for those that don't have the best spending habits and don't want their partners to become upset or judge them for this.
Do you have issues with your credit score that your partner doesn't know about? If so, now is the time to let them know before opening a joint bank account because your credit score could have a negative impact on them. And that might not be something they want to happen. Therefore it's best to let them know upfront before they're blindsided.
Joint Credit Cards
A joint credit card will work the same way that other credit cards you might have or have had work. The only difference is that instead of one person, there will now be two people that can charge their purchases using a common balance.
With that being said, it also means that both people listed to use the credit card will be held responsible for making the necessary payments to pay the credit card off each month. For example, when you're the single person listed on a credit card, you're responsible for it.
But, if two people are listed on a card and the other person doesn't make their payments, you're responsible for making them because the card belongs to the both of you. We mentioned earlier about your credit score, which also means your credit report.
Information for both parties listed on the card will appear on each other's credit report. This means that if one of you misses a payment, it's going to show up in both of your credit histories.
Having a credit card with two people has its advantages, especially if you're looking to work on your credit score. If you take the time to use the card properly and make your payments on or ahead of time, it can help boost your credit scores.
Joint Debts
The first thing to know about joint debt is more than just getting a joint bank account. The term can also be applied when you apply for loans or credit agreements with someone else.
When you do this, you're no longer responsible solely for your own debt; both people become responsible for the entire amount of the debt. It doesn't matter which party spent the money or makes the payments; you both will be held responsible for paying it back.
When it comes to credit card debt, that is one situation where one person will be held primarily responsible. With credit cards, only one of the two people listed will be named as the primary cardholder.
Everyone else that's able to use the card is going to be listed as an authorized user. If the authorized user maxed their card out and didn't make any payments, the person that's going to be held responsible is the primary cardholder.
What to Do?
If you and your partner separate, there are some things that you need to do to ensure that you're not left hanging with a massive amount of debt to pay. The first thing you need to do is freeze all of your joint accounts.
This makes it impossible for either party to withdraw money, or in the case of credit cards, makes it impossible for one party to continue spending money racking up more debt. After you've done this, we recommend speaking with a financial advisor about what to do next.
They may advise you to include the debt in your separation and request that your former partner pay half or all of the debt. Keep in mind that just because it's a request you've made doesn't mean it will be granted.
If you've still got access to a joint savings account, you can always use the money from the account to pay off any joint debts. There are times when partners decide to pay their debts separately, and that's okay.
But, you will need to speak with the company you've got the debt through and request that everything is split equally for you to pay off. After this, the next step for you is to open a single account and begin changing documentation that had the old account listed as the account for funds to be deposited into.
Joint Bank Account: A Comprehensive Guide
There's tons of information that you need to know before deciding on opening a joint bank account. While there are some advantages to opening one, there are also several disadvantages that come from having them. Hopefully, we helped you make up your mind!
