Renting a property with mates, but not sure how to manage the bills? We look at the pros and cons of joint accounts – and the alternatives.
Moving into a rental house-share with your mates may sound like the dream scenario (and a bit like a real-life version of ‘Friends’).
It’s unlikely that one housemate will want to get lumbered with having to pay all the bills on behalf of everyone else, so you need to give some thought to how payments will be shared fairly – while also ensuring all bills get paid on time.
While signing up to a joint account from which household bills can be paid may seem to offer a simple, flexible and convenient solution, it’s not a decision to take lightly.
Crucially, if things go wrong, this could have long-term implications for your credit rating.
Here we take a closer look.
With a joint account, all housemates sign up to one account and put money into that account at the right time. The shared household bills are then paid from there.
How to set up a joint account
- Speak to your chosen bank to find out what documents you need to sign, and what proof of address and ID are required to open the account. All housemates may need to visit a branch of the bank as part of the process.
- While some banks will only let you open a joint account with one other person, most will allow you to have four or more people named on the account.
- Each of you will need to sign a mandate or ‘authority.’ This sets out what each person is allowed to do, such as writing cheques or withdrawing cash. It also outlines each person’s responsibility over the account.
- Be aware there is sometimes a ‘lead’ account holder who can carry out more actions without the permission or signature of the other account holders.
Pros of a joint account
- A joint account is an easy and transparent way to manage shared expenses and pay bills, as everything is set up in one place.
- It can help prevent arguments about money as the bill-paying responsibility is shared among all tenants.
- It can make it easier to budget.
- It saves the hassle of having to repay one another.
- It can be a convenient way to track your spending.
Cons of a joint account
- A joint account creates a financial link or ‘association’ between you and other account holders – and you will then be ‘co-scored’. If one of the other account holders has a poor credit record it could potentially damage your credit score. This could make it harder for you to get credit in the future, even in your own name, as lenders may check that person’s credit history as well as yours.
- If someone fails to make a contribution, and a bill payment gets missed, this could also affect your credit rating.
- You will be jointly responsible for any debt on the account. So if, for example, the account becomes overdrawn by one of the other housemates, you are all responsible for paying the debt. In other words, you could end up footing an unfair bill. Once again, this could adversely affect your credit rating.
- You lose your privacy, as all transactions can be viewed by all account holders.
- If one person takes cash from the account without your consent, the situation can be very difficult to resolve – and there aren’t many options for getting it back.
Tips on joint accounts
- Only opt for a joint account if you are living with people you trust. After all, they are going to have as much right to the money in the account as you do. You are unlikely to be able to control or restrict this.
- Make sure everyone agrees on how the account will be run, and that all account holders have equal access.
- Have an arrangement where everyone pays in a set amount which will help build an emergency reserve fund.
- Set up direct debits and standing orders for each company you need to pay, so payments will be taken automatically.
- Check all the household bills when they arrive to ensure you’re all paying in enough to cover the costs.
- When signing the original mandate, consider asking for ‘no debit cards or cheque books’ to prevent potential problems. Also consider requesting that all outward transactions require authorisation from everyone named on the account.
- Keep a close eye on your bank statement to ensure everything is in order.
- If issues do arise, talk to your housemates. Acting sooner rather than later can prevent small issues from escalating into bigger problems.
- When setting up a joint account for bills, make sure you have a separate bank account for your personal spending.
If problems arise
If you’re having issues with your fellow account holders, cancel the mandate. This will freeze the account so that no-one (including you) can withdraw money.
Your bank will then only un-freeze the account once everyone agrees on how to split the balance remaining in the account.
For this to happen, the bank will need all account holders to agree – usually in writing.
Tips on other ways to split the bills
- Consider assigning different bills to different people. This might involve one housemate managing the gas and electricity, and another taking responsibility for the phone and broadband. Once you’ve set up this arrangement, you need to split the bill by the number of people living in the property. You then need to let everyone know who owes what. It may help to set up a spreadsheet.
- Get all names registered on the account – this should mean you don’t end up in a scenario where one person leaves, and someone else is chased for an unpaid bill.
- Check out the host of apps and tools designed to help you split household expenses fairly. Acasa, for example, is an app which helps you to choose utility suppliers and calculate everyone’s share of the bill. Elsewhere, with Splitthebills, you select which bills you want to split, and the tool then bundles the bills into one payment – and all housemates pay one amount every month. This means there is no need to deal with multiple suppliers and different payments.
- Note that while bill-splitting companies may sound appealing, you need to do your homework before signing up. Citizens Advice recently carried out some research and found some firms charge above the market average.