There is a revolution going on in banking. While up until just a very short time ago you were statistically more likely to get divorced than change who you bank with (see A Tale of Two Banks) today a smart switch can make all the difference to your hard-earned money.
Ethical banks are seeing a surge in customers switching to them from the traditional high street banks.
In the past few weeks alone the number of people switching to the Co-operative Bank – and this is in addition to the people who will be switching automatically – has soared.
Elsewhere the trend continues. Triodos Bank has reported a 51% increase in online savings account applications and web traffic to Charity Bank has increased by a staggering 500% in the past two weeks.
If you’ve yet to check out the alternatives, here’s a quick guide to who the ethical banks are, and what they can offer.
The Co-operative Bank
The largest (and soon to be even larger) group, and undoubtedly the best-known, the Co-operative Bank is fast-becoming a serious player with both personal and business customers. In the past two weeks, business bank account enquiries have increased by 43%.
It’s the only high street bank to have a customer-mandated ethical policy, which sets out who it will and won’t do business with. It also has a different model to most other high street banks, in that it’s member-owned.
The Co-operative says that money it holds will never be used to support regimes that abuse human rights, and will always be invested according to its environmental principles.
It promises not to deal with companies that manufacture or sell ‘indiscriminate’ weapons such as cluster bombs, or companies with a poor record on labour rights. It’s also made a commitment not to deal with companies that develop high climate change emissions fuel, such as tar sands.
What does it offer?
The Co-operative Bank’s Current Account Plus comes with a fee-free £200 overdraft, but you must pay in at least £800 a month. If you can’t, the bank has a standard current account for day-to-day banking needs, but this does not come with the fee-free overdraft.
Neither of these accounts charges a monthly fee.
The bank’s packaged current accounts, the Privilege account and the Privilege Premier account, charge £9.50 a month and £13 a month, respectively. In return you get a range of additional benefits such as travel insurance and mobile phone insurance.
Smile is the internet banking arm of The Co-operative and takes a similarly ethical approach to banking.
What does it offer?
Its current account has no monthly fee and comes with a 12-month £500 fee-free overdraft.
You earn 0.12% AER when you are in credit – although this will fall to 0% in August, when the bank will also increase overdraft charges across its current account range.
Smile also offers a packaged current account costing £13 a month. This account comes with RAC UK and European breakdown cover, and worldwide annual family travel insurance, as part of its package.
Coventry Building Society
Coventry tops the Ethical Consumer list for current account providers. The magazine has put together a comprehensive guide to ethical banking, rating every bank from the most ethical to the most traditional or non-ethical using a points system.
You do need to be a subscriber to view the full content, but it rates each bank on its stance on issues such as the environment, animal welfare, people, politics and product sustainability.
You can input the importance of each of these issues to you, and then see which banks best meet your ethical beliefs, and which are best avoided.
You can see the full list here.
What does it offer?
Coventry’s easy-access savings accounts often top the best-buy tables on its interest rates alone. It currently pays interest of 2.80% AER/gross including a 0.80% bonus in the first year.
Other building societies
Coventry BS isn’t alone in offering customers seeking an ethical choice a better alternative to the traditional high street banks.
Building societies are restricted by law in who they can lend to, and are also considered inherently more democratic because they are owned by customers and have no shareholders. This in theory means they are less likely to seek short-term profit.
Cumberland, Leeds, Nationwide and Norwich & Peterborough building societies all dominate the top of the ethical league table compiled by Ethical Consumer.
Bottom of the list is Barclays.
Triodos promises to only lend money “to people and businesses that work to make the world a better place, from organic food producers to wind farms,” so you can be sure that you’re not indirectly supporting unethical businesses.
Its Online Saver Plus account is an easy-access online savings account that can be opened with as little as £1.
The interest rate is 2.50% AER/gross variable, including a fixed 12 month introductory bonus .
Ecology Building Society
Ecology has a different model to any of the other banks or building societies. It uses the money in its members’ savings accounts solely to support its mortgage lending on properties and projects that respect the environment.
It has a number of savings accounts, with the minimum opening amount ranging from £25 to £500. Interest rates range from 1% to 2.25% AER/gross.
Charity Bank basically does what it says on the tin – namely lend money to charities and social enterprises that make a positive impact.
In its 10-year history, the bank has lent over £170 million to charities and social enterprises.
The bank has been a definite beneficiary of the move towards ethical banking., with 440 new accounts opened between 1 January and 30 June 2012, compared to just 140 accounts for the same period in 2011.
It has a number of accounts such as the Charity Bank Savings Account. This pays from 0.40% to 1.75% AER/gross, depending on whether you choose a notice or easy-access account, and the length of notice needed to withdraw your money.
Young ethical savers can open the Small Steps Account, which pays 2% on balances of £10-plus to under 16s.
Always remember though when choosing where to keep your hard-earned money that ethical beliefs is only part of the story, you also need to bear in mind how you spend and save, and choose a bank that will make your money work best for you.