by A.W. Berry

Created on: February 08, 2010

Disadvantages of having a joint checking account revolve around 1) legal and regulatory management of the account, 2) account usage complications, 3) the type of checking account contract, and 4) the type of checking account. Understanding the potential disadvantages of joint checking accounts involves foresight into how and why the account is necessary and whether or not the regulation, contract and use of such is favorable to all account holders. Several potential factors regarding joint checking accounts may present a disadvantage for joint checking account holders.

• Funds may still be subject to garnishment

The legal disadvantages of having a joint checking account pertains to the treatment of money within the account under specific circumstances such as death, withdrawal, transfer of funds, closing of account etc. Each checking account is subject to State and Federal regulations, and contractual terms between the owners and the financial institution at which the account is held. Depending on the circumstances, rules governing the use of the joint checking account may be disadvantageous. For example, different States have different classification of ownership which can affect whether or not funds within a joint checking account can be garnished.

• Wrong type of account contract

Disadvantages of having a joint checking account may also relate to the type of account contract. These contract may be either joint tenancy, tenancy in common or tenancy in common with rights of survivorship. This distinction determines how many joint account holders exist and what authority those account holders have in relation to the account(s) and the funds within it.  If a checking account is designated tenancy in common only can affect whether or not money within a checking account automatically become the property of the second owner. In such case, joint tenancy can be a disadvantage if the other account holder passes away and the account does not have rights of survivorship.   

• Differences in authorizations afforded to account holders

Being fully aware of account holder authorizations is helpful in preventing potential disadvantage related to such. Account holder status can affect access to information and the ability to make decisions regarding the account. In cases where a joint checking account consists of both a primary and secondary account holder, further disadvantage may arise for the secondary account holder.  This is because secondary

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