Joint vs. Separate Checking Accounts, Which is Better?
Some people swear by joint checking accounts. Others wouldn’t touch it with a 10 foot pole, and prefer to stay with separate checking accounts. Which is the better way to go? That probably depends on personal factors more than anything else. Personal preference is a consideration, but there may be some other factors that are more concrete.
When Joint Checking is Better
There are times, and with some couples, that joint checking is the better choice.
- Can put the stronger money manager in charge. With many couples, one partner is stronger when it comes to managing money. One spouse may have a history of well-managed finances, and of properly allocating money and paying bills on time. The other may have a bad history on this front. If that’s the case, having a joint account with the stronger money manager in charge will be a benefit to both spouses. It can also be a matter of one spouse simply not wanting to manage the checking account. In reality, managing a checking account is the most important and fundamental function of financial management. One spouse may not want that responsibility.
- Fewer bank fees. Multiple checking accounts mean multiple monthly fees. By having a joint account you have only a single set of fees each month. It also cuts down on paperwork and management. A single account can be managed much more easily than two separate accounts. It means one bank reconciliation per month rather than two, as well as less paperwork.
- No more secrets. A joint account is one of the best possible ways of preventing financial secrets. Separate accounts mean that each spouse can handle the money anyway they want. Since they probably don’t review each other’s checking account statements, they have no idea exactly what the other spouse is doing with the money. A joint account removes a major way to keep secrets.
- Creates a single financial plan. Even following marriage, a couple can have a strategy of two people, two financial plans. Separate checking accounts just don’t do a very good job of helping a couple to merge their finances. A joint checking account will help this come about, and as it does the couple will join in finances in other ways. For example, a couple will have one household budget rather than two, and may work jointly to save for investing and paying off debt.
When Separate Checking is Better
For all of the advantages of joint checking, there are times when separate checking accounts simply work better.
- Avoids overdrafts. The biggest negative with joint checking is the greater possibility of account overdrafts. You’ll have two people writing checks and running debit transactions out of a single account. That can be an overdraft waiting to happen. With separate accounts, each partner is responsible for his or her own account. For that reason, overdrafts – and the fees they bring – will be less likely to occur.
- Works as a built in back-up checking account. In the event of identity theft or other problems with one spouse’s checking account, the other spouses account can function as the backup checking account. Sure, the spouse who lost their account can create a new one, but there may be a period of at least a few days where they will have to go without a checking account. In that situation, the other spouses checking account be available to save the day.
- Can work better with two paychecks. If each spouse has a paycheck, separate checking can work better. When you have a job or business, there are usually expenses attached to it. It could be commuting expenses or buying lunch for a job, or having business expenses in connection with self-employment. In either case, each spouse would need to have a dedicated checking account to enable them to handle both their income and expenses.
- Unequal credit standings. Separate checking accounts could be a complete necessity if one spouse has superior credit while the other is a poor credit risk. Again we get back to the fact that some people are better at managing money than others. The spouse who is a strong money manager and keeps his or her credit clean, may not want to merge their finances in the form of a checking account. While the stronger spouse is working to keep the couple’s credit and financial standing clean, the other may be driving it down. One of the most destructive ways to do this would be through a joint checking account. Overdraft fees and bounced checks could be routine, compromising the credit standing of the stronger money manager.
Which checking account type do you prefer? What are the reasons why you feel that way?
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About the Author
is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com
. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut
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