Like all other bank accounts, a joint or collective account has advantages and disadvantages that are important to know before opening it. Understanding how such an account works allows you to assess the risks it generates and better prevent potential disappointments.
How does a joint bank account work?
The operation of a joint bank account depends on the validation of the account holders’ signatures. If the account is named “Mr. X or Mrs. Y,” it means that transactions on this account only require the signature of one of the two holders. Conversely, if the account is in the name of “Mr. X and Mrs. Y,” the agreement of both signatories is necessary to carry out a transaction.
Advantages and disadvantages of this account
The first advantage of a collective account is its practicality. For a couple, friends, or roommates, pooling resources in one account allows them to handle common expenses. This simplifies income management and makes it possible to consider joint projects thanks to the collected funds.
However, the holders of the joint account are responsible for the transactions made on it, whether their signature is joint or separate. If the account has a negative balance, the bank will require the holders to fund it, without trying to determine who incurred the debt. Similarly, the holders can be banned from banking in case of unpaid debts.
In what case is this account interesting?
Due to the pooling of risks, a collective account requires real trust between the holders, especially in the case of separate signatures. Otherwise, it is better to open a joint account with joint signatures. This way, you can refuse to endorse transactions that could endanger the account.