Warning to couples: Joint bank accounts are trouble

In the fervent words of Ed Sheeran: your spouse may “be lovin’ you until you’re 70”.

But just possibly, they may not. And even if your passion lasts past the pension, recent changes to banking and credit report rules mean couples’ finances could be in peril.

Any joint bank accounts, but some more than others, now expose you and your partner to significant risk.

Indeed, today a ‘his, hers and ours’ approach – where you maintain separate transaction, savings and credit accounts, then pool your money only for household expenses – could be safest.

Here are the four dangers if you instead jump into a relationship ‘banking boots and all’.

Danger 1: We’ll start with a devoted partnership, where the object of your affection does the right thing by you and perhaps, to quote Ed, falls “in love with you every single day”. Changes to the credit card qualification rules mean one of you could still be in big trouble... were the other to unexpectedly pass away.

Just about all credit cards are held in single names only. Think you have a joint one? Nope – someone is the primary card holder and the other person, merely a secondary card holder with no rights to that card except those bestowed by their spouse.

If a primary card holder sadly dies, it will be immediately cancelled. The problem is that you (or your loved one) may not get approved for a replacement.

I’ve heard so many heart-breaking tales – after heart-break – of banks knocking back the person left behind for a credit card, regardless of what is often really decades of banking history (they’re even knocking back many existing card holders for credit limit increases).

In your relationship, big red flags are a non-card-holding spouse with a lower income, income that predominantly comes from investments rather than earnings and/or an age over 50.

This spouse may well not qualify if the other died… particularly given that tough new credit card criteria also mean you now need sufficient disposable income to clear any issued limit within three years.

Danger 2: “People fall in love in mysterious ways” – thank you again Mr Sheeran! – and opposites often attract. If your spouse is a bit disorganised (or busy) but you leave it up to them to handle joint loan repayments, you are in heightened danger of a damaged credit score.

Since September, when the big banks began feeding the information required to Australia’s credit bureaux, we’ve had a fully-fledged so-called comprehensive credit reporting system.

Now, even if a credit account repayment is made as few as 14 days late, it will push down somebody’s new U.S.-style credit score: yours too if your name is on there. And that transgression stays on credit records for two years.

Of course, don’t even think – if your beloved is blasé about banking – of putting them in charge of repayments on a credit card that’s in your name.

Incidentally, the same problem applies to bills held in joint names. You have 60 days until a ‘late payment’ becomes a much-more-serious ‘default’ and will be captured on your credit report – and in your score – for five years. But there’s another concern….

Danger 3: Ed swoons that he’ll love until: “I can’t sweep you off of your feet”. Well, at any stage, a questionable consort with whom you have joint bank accounts could sweep the money out of them.

Worse still, if there’s a secondary credit card holder on a card for which you are the actual account holder, they could run up the debt all the way to the limit… and then run out on you!

If your name is the one on the credit account, you’re the one responsible for the debt. Think carefully about the trust you have in a possible ‘money’ mate – projecting into the future – before taking this huge leap of financial faith. And on a related, potentially financially disastrous note…

Danger 4: As Ed sings: “Maybe it's all part of a plan.” Or it will be… if your relationship turns toxic.

Again, I’ve heard some horrific stories of bitter exes remaining for months or years in a once-shared house where the bills and lease weren’t in their name, and vindictively ignoring all repayments.

Unlike with a credit card, there’s no limit to the damage to you they could do. You’d be fully liable and your credit report and score in tatters… unless you remember to cancel every contract for which you’ve signed up solo or jointly (this applies even after simply flatting with others too).

With apologies for ruining the romance, as Ed sort-of says, consider carefully before you take someone into your loving arms and also your economic fold.

So “your eyes still smile from your cheeks”.

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Nicole Pedersen-McKinnon is the author of How to get mortgage-free like me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter, LinkedIn, YouTube and Instagram @NicolePedMcKMoney.