Credit Score Basics > How does a 3 way joint bank account work?

How does a 3 way joint bank account work?

Wollit Team3 minute read · Updated 30th June 2024

A 3-way joint bank account is a single account shared by three people. All three account holders have equal access and control over the account, meaning they can deposit, withdraw, and manage the funds as they see fit.

Each account holder is issued a debit card and can access the account just like any other bank account. This makes it easy for the three people involved to manage their shared expenses and keep track of their financial activities.

This type of account is becoming increasingly popular in the UK, particularly among family members, partners, or close friends who want to manage shared expenses and financial obligations together.

However, it’s not necessarily the best idea to open one. Let’s see why.

Which banks offer a 3-way joint account?

Most UK banks only allow a maximum of two joint account holders. However, some do allow more. Here are the ones we found:

HSBC: up to 6 account holders;
TSB: up to 5;
Metro Bank and Barclays both allow up to 4;
Co-op Bank allows up to 3 joint account holders.

Any other bank we looked at (Halifax, Natwest, etc) only seem to allow two owners for their joint accounts.

Why should we open a 3-way joint bank account?

There are a couple of reasons to think about opening a multiple owners joint account:

A joint account can be a good way for you and your family members, partners, or friends to manage shared expenses.
Pooling your money into a single account ensures that your bills are always paid on time and in full.
Such an account can also eliminate the need to transfer money between accounts or keep track of who owes what.

What are the risks of a 3-way joint account?

However, while a joint account can be a convenient way to manage shared expenses, there are some potential risks to keep in mind:

A three-way joint account requires a high level of trust between all account holders—even more than a joint account with just two people.
All three account holders, including any overdraft debt, are equally responsible for the account. This means that if one person overdraws, the bank can seek repayment from any of you.
If you have a dispute, closing the account is not easy, as you’ll need all three account holders to sign off. Only a court can resolve the issue.
Having a joint account can impact the credit scores of all three account holders. If one person has a poor credit score or a history of financial difficulties, it could make it harder for the other two to get credit in the future.

What are the alternatives to a 3-way joint account?

If a joint account doesn’t seem like the right fit, a simpler solution would be to separate accounts and simply transfer money to each other when needed.

You could also use a shared expenses app.

Some of the most popular ones are:

Using a shared bills app is great for a bunch of reasons:

Shared bill apps also make tracking who owes what, sending reminders, and settling debts easier. However, it’s a bit more difficult to keep track of who’s responsible for which expense through a joint account.
Shared bill apps are also better suited for managing shared expenses when the account holders have less trust or commitment. For example, when you’re sharing a flat with friends.
Most importantly, a shared expenses app does not create a financial link between you three. This means the credit scores of everyone involved are not tied together.

How can opening a 3-way joint bank account affect our credit scores?

A joint bank account is risky as it can affect each account holder’s credit score.

First, opening a joint bank account creates a financial link between the account holders. When running credit checks, lenders may look at the credit histories of all people linked to the account. If one of you has a poor credit history, it could impact everyone else’s.

Also, all account holders are equally responsible for the joint account. If, for example, an overdraft bill for the joint account is not paid on time, it will be reported as a late payment on all three credit reports – and lower the credit scores of everyone involved.

Could opening a 3-way joint bank account help us improve our credit scores?

A joint account with multiple owners could – in theory – be a tool to improve your credit scores. For example, having an arranged overdraft that’s not too large and paid off regularly and on time would be recorded as a debt repayment on all three credit reports.

But this is really not a great way to go about building credit. Not only does linking your credit file with someone else’s put you at risk, but it’s also an expensive credit-building strategy. Overdraft interest rates are much higher than regular loans or credit cards.

Luckily, nowadays there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available on Android and iOS. It works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies.

This keeps you safe from high interest rates or maxed-out overdrafts. More importantly, it also allows you to build your credit history and improve your credit score without the fear of financial associations and without having to piggyback on someone else’s credit rating.