There are many good reasons to open a joint checking account, but before doing so it is important to know all the disadvantages of entering into a bank account co-ownership with another person.

One of the primary problems people encounter with joint checking accounts is if a relationship ends or one owner cannot be trusted. However, even with the most trustworthy financial partners, there are some disadvantages that come with a joint checking account.

Here are a few of the biggest challenges people run into with joint checking accounts:

*Record Keeping

Unless both account owners are meticulous about record keeping when withdrawals are made on the account, this can become problematic if one owner is slow to record payments or doesn't enter when checks have been written.

*Account can be Emptied by Co-Owner

In situations where a couple divorces or breaks up, this can be a huge disadvantage because one party can empty the entire account without permission or even the knowledge of the co-owner.

Trust is an important part of having joint financial accounts and if there is a lack of trust, this can lead to financial difficulties with the account if one owner decides to walk away with all the money.

*Co-Owner Writes Bad Checks

Bad checks are a risk with a joint checking account, and this can happen either intentionally or unintentionally. Either way, the end result is a lot of bank fees for overdrawn accounts.

*Overspends

Even if the checks don't bounce, with a joint checking account you run the possibility of your co-owner spending more money than you want or hoped. Since both of you have joint ownership and responsibility for the account, it is an equal partnership and your co-owner legally has the right to spend as they feel fit, just as you do.

Before considering opening a joint checking account, it is important to sit down and create a financial agreement so there are no misunderstandings or disagreements where spending is concerned.

*ATM Withdrawals

ATM withdrawals can be tricky unless both parties make a pledge to thoroughly record and/or save receipts for each ATM withdrawal made. If one party repeatedly makes withdrawals and no record is kept, this could quickly deplete the account without the other account owner realizing this is occurring.

*Liability

If your co-owner is sued and is required to pay money to another third party, your money is included in that calculation. In terms of liability there is no separation in joint bank accounts and even if your personal agreement is a 50/50 split, in the eyes of the law this won't hold a candle in court; your money can be used to pay your co-owner's liability.

*Tax Liability

The primary person on the account (the one who's social security number was used to establish the account) will receive the 1099 INT in the mail. Legally this co-owner will be the one to claim any interest earned on the account.

With today's low interest rates on checking accounts, this may not be a big deal since regular checking accounts generally don't earn a significant amount of money anyway, but in some cases this could be a disadvantage for the person who is registered with the SSN on the account.

There are many great reasons and advantages to having a joint checking account, but it is important to be aware of the disadvantages too. Being educated is being forewarned of the things that can potentially go wrong even in the best of relationships, partnerships or circumstances.

Learn more about this author, Leigh Goessl.
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