Opening a joint account as a newcomer in Canada: What you should know

Your financial journey as a newcomer in Canada begins with choosing a bank and opening an account. As you settle in, money matters and financial literacy becomes increasingly important. In many countries, owning a joint bank account has a cultural significance. After moving to Canada, some newcomers intend to continue this practice and open a joint account here as well. However, there are a few things that you should be familiar with before you decide to proceed with a joint account. 

In this article, we will dive into the joint account in more detail and share some of the factors to consider before opening an account so you can make an informed decision to manage your finances. 

What is a joint bank account?

Joint bank accounts are chequing or savings accounts in which two or more people share ownership rights on a single account. These rights allow all participating account holders to deposit, withdraw, or manage the funds in the account, regardless of who puts the money into the account. 

Joint accounts can be used by couples, family members, roommates, or between a parent and child. As a joint account holder, you share equal access to the account and responsibility for all the transactions made through the account. In most cases, unless you state otherwise, the other account holder does not need your consent to make transactions. This is why you should only open a joint account with someone you trust. 

In many cases, joint accounts include the right of survivorship. This means that if one of the account holders dies, the surviving account holder becomes the owner of the account, with the right to deposit, withdraw, and deal with the funds in the account. In Quebec, however, a joint account is frozen upon the death of one of the joint account holders. You should consult with your banking institution to obtain more specific information about how this works.

Benefits of setting up a joint bank account

• To pay for living expenses: A joint chequing account can be useful to keep tabs and pay household bills or deal with other shared expenses like rent, mortgage payments, etc.
• Save for future goals: A joint savings account can help save for long-term shared goals such as home purchase, renovation, vacation, emergency fund, etc.   
• Convenient money management: No hassle of transferring money between separate accounts.  

Tip: If you and your partner/family member/friend have individual accounts at RBC (Royal Bank of Canada), opening a joint bank account is a very simple process that can be done online; no branch visit necessary. You can speak with an RBC advisor to learn more about this process.

How does a joint bank account differ from an individual account?

A joint account has shared ownership between two or more people, whereas a single account can only have one account holder. You can have both an individual account as well as a joint bank account: many Canadians use this method to manage payments for rent, groceries, insurance, utility bills and such.

Factors to consider while opening a joint account

Shared financial control

• Your joint account holder has equal ownership of the account. This means that they won’t need to consult you or obtain your permission before withdrawing funds or making any transactions through the account, even if their action creates or increases an overdraft on your account. 
• If your account co-owner has unpaid debt, the funds in your joint account may be used to repay that debt.
• Evaluate if your joint account holder is able to act in your best interest. If they have any personal issues or obligations that may interfere with them properly managing your finances, you may want to reconsider your decision. Trustworthiness is an important factor while opening a joint account.  

Impact on credit score

• As a newcomer, building your credit history in Canada is very important. If you have no credit history or a poor credit history, it may be harder for you to get a loan or mortgage. It could even affect your ability to rent a house or apartment or get hired for a job. Should you choose to get a credit card based on your joint account, your credit score will be reflective of spending habits of all the account owners – which means that any payment defaults or bad spending habits by your partner may lower your credit score/rating. 

Newcomer offers

• If you choose to open a joint account, newcomer benefits offered by the bank will only apply once. For instance, let’s assume that a couple decides to open a joint account at RBC and the bank is offering $100 CAD cash to everyone who opens an account. In case of a joint account, the couple would receive $100 CAD just once in their account. Instead, if they decided to open separate individual accounts, each one of them would receive $100 CAD in their own accounts, effectively doubling the amount. The same principle would apply to other offers such as the number of free international money transfers permitted through your account.
• In some cases, failure to choose a primary account owner may lead to ineligibility for certain high value newcomer offers such as obtaining a free iPad, Airpods, or a $300 CAD cash offer. 

Unforeseen and unexpected circumstances

• Be sure to check with your banking advisor to know what happens in the scenarios of a relationship breakdown, divorce, and if you or your joint account holder dies or loses mental capacity. 
• Consider including information about your joint account in your will, so that your wishes are clear.

As you begin a new chapter of your life in Canada, information and access to the right resources is key to getting started on the right foot with your finances. Outline your goals and discuss your unique situation with a banking advisor so they can recommend the right options for your financial wellbeing.