Joint accounts are very common in Spain. They’re used by couples, families, businesses, and even roommates to easily manage their daily finances and, while doing so, try to save a little. However, like any financial product, it’s a good idea to understand how it works to avoid any problems. Let’s delve into all the advantages and disadvantages of sharing a bank account today and what options you have if something goes wrong.
Starting a joint project is one of the most beautiful things in life. But for things to go well, it takes trust—a lot of trust. This is the case with sharing a bank account : a wealth of benefits and convenience for those who use it, but it can become dangerous if we’re not careful, as it’s easy to fall into the trap of donations. So, below, we’ll review everything you need to know about having a joint account with your partner, business associates, friends, or children. Shall we begin?
All the advantages and disadvantages of sharing a bank account
A joint account is one with two or more account holders. But, as you’ll see, beneath this simple definition lies a lot of insight we should understand before getting into the details.
What ways are there to share accounts?
Before discussing the advantages and disadvantages of account sharing, it’s helpful to understand the different methods available, as each is designed for a specific use and offers different benefits. Let’s look at how you can share your finances:
Shared checking account
They are the most common and the appropriate option for managing the daily financial life of a family or business, as they allow you to set up direct debits, receive income, make transfers, withdraw cash, and use cards or checks, as well as contract other financial products such as credits, personal or business loans , mortgages, leasing, insurance , funds, and much more.
Shared savings account
Although they do allow for certain types of transactions, such as transfers, these types of joint accounts are designed to put savings to work . Therefore, they work more like a piggy bank, where our money earns interest over the medium and long term. Many families use them as an additional tool to a shared checking account to cover the down payment on a new home, their children’s college tuition, or retirement . If you’d like to learn more about how these financial products work, we recommend taking a look at how interest-bearing savings accounts work .
Linked account
These more recent types of accounts are a hybrid of individual and joint accounts . They allow transfers between accounts, making it easier to manage payments and receipts, while maintaining the privacy of each person’s individual accounts. They’re similar to small, shared deposits that depend on a private account.
In addition to these types of joint accounts, there is another factor we should be aware of: the disposition regime , or, more simply, the right of access each co-owner has to the funds. These are the main regimes:
Joint withdrawal: To carry out any capital withdrawal, all account holders (or a certain number) must authorize the transaction. This is usually the most common option for companies, especially those with larger structures.
Joint or joint disposition: In this option, any account holder can use the funds in the account without needing the approval of the other joint holder(s). This is the option chosen by most couples, families, and cohabitants as it’s much more practical, but also more dangerous if you don’t trust each other enough.
Subordinate arrangement: In this type of model, account holders have different levels of control. This allows certain individuals to have complete control of the account, while other account holders can only perform certain operations independently, such as withdrawing a certain amount of money. More complex options, such as requesting a card, will require authorization from the other account holder(s). This type of account is the best option for parents with young children or teenagers, as they are allowed to set withdrawal limits, restrict transfers to other accounts, and other interesting options.
The advantages of shared bank accounts
Ok, sometimes they’re an essential requirement for applying for a mortgage, but the truth is that sharing an account greatly simplifies a couple’s financial life. Its many advantages are the other big reason why many people choose to share a bank account. These are the main benefits of sharing an account:
They are easy to open and cheap to maintain.
Generally, opening a joint account doesn’t require you to meet requirements like depositing a salary or paying fees . However, remember, as we always say, it’s a good idea to be well-informed before signing up for a contract, since if you want to renegotiate something, that’s the best time.
In fact, you probably won’t even need to open a new account. Many banks allow you to add a joint account holder to any account without any problems. And while it’s normal to only be able to add two people, some banks allow you to add more than four people to the account.
⚠ ️ Caution : We don’t recommend sharing your account if you don’t have another one for your personal finances.
The fastest way to organize your regular payments
Living as a couple means sharing a lot of expenses . Electricity, water, internet, rent or mortgage, grocery shopping, meals out, vacations, a car… and that’s not even mentioning the children. In the long run, having each person make a payment and then have to keep track of the monthly bills can be incredibly cumbersome. In these cases, a shared account is, as they say in Lord of the Rings, «one account rules them all…the bills,» since we only have to worry about transferring a set amount each month to that account and centralizing all bills and collections there.
They allow greater control and distribution of tasks
Have you heard that four eyes see more than two? Well, when there are two account holders, it’s easier to review finances , especially if we have the tools offered by digital banking. This, in turn, also allows for a better distribution of tasks. And let’s face it, in many couples, one partner is more financially inclined (or less skilled). If this is the case, we can delegate important tasks like alerts and notifications to the person who best understands these topics using separate profiles.
Facilitates long-term family planning
A shared bank account is a great tool for implementing certain financial habits as a couple, such as planning and saving. With them, it’s often easier to achieve goals like a good vacation, saving for your children’s college tuition, a home improvement project, or a down payment on a new home. Pursuing a goal together is much more stimulating than doing it alone.
A family tool that allows individual use
It depends on the arrangement, but generally, account holders have complete freedom to choose how to control and spend the money in the account, meaning that withdrawing cash or making any purchase doesn’t require both parties’ permission . The good news is that all transactions are recorded , which in turn makes it easier to review how the money is spent.
They can bring interesting benefits to partners.
If the joint account is in good financial health, it can be the gateway to better interest rates or better deals when purchasing other associated financial products.
They are not very problematic in the case of a breakup.
If, for whatever reason, things aren’t working out for you and your partner, a joint account isn’t one of those headaches that’s hard to solve. Most accounts allow one account holder to unilaterally unsubscribe .
On the other hand, if we want to close the account , there’s no problem either, but in this case, authorization from both parties is required. Fortunately, banking has evolved significantly and currently offers all kinds of solutions to streamline these types of cases , ranging from online procedures to being able to visit different branches or the same branch, but on different days or times than the other person… It’s all about seeing what options your bank offers.
The disadvantages of sharing a bank account
Although, as we’ve seen, the advantages are many, there are also some disadvantages that we should keep in mind when deciding to open a shared account.
Beware of the costs of cards and associated financial products
Although the most basic option generally won’t cost us anything, other services may, such as a second card, do . It’s very convenient, but it can incur associated costs for issuance and/or renewal. So it’s important to review the potential costs of all these additional features before signing up.
They are a bad idea if one of the parties has a bad financial history.
Debts, non-payments … It’s not a good idea for one of the joint account holders to have this type of history behind them, as it’s more than likely that sooner or later we could experience some type of collection, seizure, or freezing without prior notice, which could be a major setback for our household finances.
They are also not very suitable for people with bad financial habits.
Sharing an account actually requires much more than trust. The freedom it grants each account holder is, on the one hand, a great benefit, but if one party lacks proper financial control, it can become a major problem . Although they are recorded and therefore allow for control, if one party makes excessive charges or unilaterally incurs debt, both parties will be responsible for the associated payments, as well as any fees or penalties.
Is it possible to determine liability so that only the responsible party bears the brunt? As the Bank of Spain indicates in its blog , these are complicated cases and must be decided in court , as the banks do not have sufficient information to adjudicate in these types of cases. However, there are three situations in which the Bank can help us :
- If the card or loan belongs to only one of the account holders.
- That the other party is unaware of the request for this type of product or direct debit payments.
- That the account contract includes some type of clause for this type of overdraft.
It must be taken into account for the Income Tax Return
As you may have guessed, the Treasury keeps an eye on the money, no matter how much it moves from your bank account to a shared one. They consider the money held there to be the property of the account holders, and to determine this, they divide the value by the number of account holders and include it in each of their assets. In other words: if you have €20,000 in a joint account with your partner, you’ll each have to consider €10,000 in your tax return, plus any interest generated (that is, if you don’t file a joint tax return , of course).
It is possible, however, to redistribute this allocation if we deem it necessary. To do so, we must specify to the Tax Agency what percentage corresponds to each account holder. This is useful in cases where contributions to the account are not made equitably.
Care in case of separation or death
As we’ve seen, one of their benefits is that they’re easy to manage if a couple or marriage breaks up. But this ease of use can be a real pain if the other party decides to act in bad faith and unilaterally cancel their account . As with debts incurred by one of the parties, in these cases we should also go to court if we disagree with assuming the overdraft in the account.
Another point to consider is what happens if one of the account holders dies. If you have children from a previous partner, they could become the new heirs and, therefore, be granted power over the accounts.
Our 4 tips for sharing a bank account without too much risk
Let’s not kid ourselves, as much as we’d like to, the convenience of sharing a bank account is so great that it’s hard to do without it. We’ll give you a few financial tips so you can enjoy them with the lowest possible risk.
1. Shared account yes, but own account too
Sharing an account should be viewed as a joint project, not as our primary source of funds. It’s important not to lose our financial independence, and this requires maintaining our own account (or second account) from which to divert funds into a joint account. Only in this way can we minimize losses if things go wrong , as we’ve seen when discussing the drawbacks, and maintain financial independence that extends beyond the couple.
2. Study the conditions carefully before choosing which account to share
Whether you’re using an account you already have (which hopefully isn’t your primary one) or opening a new one, take some time to study the terms and conditions of each one . As we’ve seen, shared accounts can offer interesting extra services, such as having two credit cards, and with a good search, you might find them free instead of having to pay extra for them. The same goes for possible fees and other details associated with this type of product. Review and compare different entities before deciding.
3. Trust is no substitute for control
Trusting our partner is a given, but it doesn’t hurt to implement some sort of monitoring routine for both parties . It doesn’t matter if one partner is bad with numbers, knowing the couple’s financial health helps us understand our current and future status and prospects.
To make it more enjoyable and smooth, you can try establishing routines as a couple, such as spending 30 minutes at the end of the month to review your monthly expenses compared to previous months. This can undoubtedly be made much more fun with a snack or dinner in between.
4. Do not use it to give (a lot of) money to a third party
Relatively recently, the news broke that the Treasury wanted to eliminate joint accounts between parents and children. Although it was a hoax, it did have some basis in fact. Apparently, some people use joint accounts to transfer money between them , something that legally constitutes a donation and, therefore, should be taxed, as reflected in multiple Supreme Court rulings.
Does this mean you can’t share your money with your loved ones? Yes and no. Although officially any of these transactions could be considered a donation, the Tax Agency focuses on cases that meet any of the following three conditions:
- There are certain roles where one person only contributes and the other is the one who always takes away.
- The contributions are large amounts of money (€800-1,000)
- Contributions are made periodically (once a month…)
If any of these points are met, we are likely to receive a notification from the Treasury indicating that a hidden donation is being made. If we cannot prove otherwise, we will have to pay inheritance tax and a fine , which may be increased because the amount payable is usually calculated based on all contributions to the account that have not been taxed in the previous three years.
