Setting up a joint bank account to pay for utilities and even rent as well is a pretty common proposition—that can come with serious risks.
It may sound like a straightforward way of managing your money and ensuring that things are being paid on time and in full, but having a joint bank account with your housemates is a far bigger financial commitment than most people realise, and it can have serious implications for your future.
Here is just some of the crucial information you need to be aware of before opening a joint account:
- The commitment doesn’t end when you move out. Once you’ve closed your account, you remain financially linked to every person named on the joint account for another six years.
- You may not all have the same permissions. This means nominating a “lead account holder” that will be able to perform actions the rest of you won’t have access to.
- It doesn’t guarantee things will be paid on time. Opening a joint account comes with all the same issues as other arrangements, including the age-old problem of one housemate not paying up in time for bills to be paid.
What can go wrong
Being financially linked to your fellow account holders may not sound that dangerous on its own, but this can have big implications for your future.
While you may all be responsible adults at this point in your life with financial security, life still happens. There is a good chance that at least one of you will fall into the red during the six year period you continue to be linked.
Regardless of whether you’re still best buddies or simply Facebook friends, this will have an effect on your credit rating. Even if you’ve stayed on top of your own finances for years, someone else’s decisions or lack of good fortune may prevent you from being approved for anything from loans to mortgages to phone contracts.
What are my alternatives?
If you’re considering setting up a joint bank account, the chances are you’ve already realised that most utilities companies won’t let you set up a bill that comes out of multiple accounts. So your options for ensuring financial responsibility without the knock-on effects to your credit score are somewhat limited by the need for it to come out of a single account.
Nominating one person for each bill
This is probably the most common practice, and you may have already vetoed this to avoid the age-old issues of being legally and financially responsible for footing the bill when someone pays you late or not at all.
It’s definitely an issue that a lot of sharers face, but a few passive aggressive messages in the house group chat are a small price to pay for not being financially chained together for over half a decade.
Opening an account in one person’s name for rent and utilities
Another option you might consider if you’re keen on all paying money into a single account each month to keep things organised is one housemate opening an account in their name that is to be used exclusively for utilities and/or rent.
This is both similar to and safer than opening a joint account with everyone’s name on it, but comes with one very obvious snag. You need to be able to trust that this person isn’t going to spend everyone’s money, which you might be reluctant to do if you’re just housemates as opposed to close friends.
Bill sharing apps
With the rise of mobile technology comes a more digital version of doing pretty much anything, including paying your bills. Bill sharing apps are becoming increasingly common with students and sharers as a means of keeping things simple and keeping the peace.
Depending on which platform you opt for, your bill sharing app could allow you all to be billed individually and directly for your utilities, creating the illusion of a joint account from your end. It’s arguably the best of both worlds.
acasa is a bill sharing app and household management platform designed for students and house sharers. With acasa, you can not only get your bills paid in full and on time with our direct billing system, but keep household costs fair and transparent by tracking individual balances. Get a free quote for your property and enjoy a more stress-free approach to managing your shared house today.