Triodos Bank has today unveiled a new ethical current account, with customers able to open it from June 2017.
The bank says it is challenging the traditional ‘free banking’ model by minimising overdraft fees and debit card charges outside the UK. It says these charges unfairly penalise those who are financially vulnerable.
Triodos will not allow unarranged overdrafts - with unpaid items instead subject to a flat £5 fee - which it says will minimise unexpected charges. Authorised overdrafts are available up to £2,000, while using a debit card abroad will incur a 2.5% transaction fee and no cash machine charges.
However, the account will pay no interest and there are no cash incentives to switch from your current provider. Account holders will pay £3 a monthly fee and receive a debit card made from renewable plastic.
Triodos Bank does not have any physical branches, meaning this account can only be operated online and through its mobile banking app.
What is Triodos Bank?
Triodos Bank originated in the Netherlands and first opened a UK banking arm in 1995. The bank is registered in the Netherlands meaning deposits are covered by the Dutch deposit guarantee scheme, rather than being covered by the UK’s Financial Services Compensation Scheme (FSCS).
This means your cash is protected up to €100,000 (£85,000) in the event of a bank failure.
The bank already offers savings products, Cash Isas and ethical investment funds and a Stocks and Shares Isa. It says launching a current account will give consumers the chance to avoid unethical high street providers.
As an ethical bank, it only lends to and invests in organisations that “benefit people and the environment”.
There are a number of other ethical banking providers operating in the UK including Charity Bank and Ecology Building Society but neither provider offers current accounts.
The Co-operative Bank has its own ethical policy and does offer a current account. However, its credentials have been undermined since US hedge funds took a majority stake in the bank in 2013 and it is now up for sale.
How does this account compare?
If you’re looking for switching bonuses or big interest rates then this isn’t the account for you.
For high interest Nationwide FlexDirect pays 5% interest on balances up to £2,500, although this rate falls to 1% after a year, while First Direct’s 1st Account offers a £100 switching incentive if you’re looking for a cash bonus.
However, Triodos Bank is targeting a different section of the market altogether - consumers looking to avoid big banks and unethical charges. It has detailed information about its ethical policy on its website and promises to support green and sustainable enterprises. It won’t, for example, lend to or invest in companies producing alcohol, weapons, fossil fuels or gambling products.
Andrew Hagger of comparison website Moneycomms says: “This new bank account will not suit everybody but it is not currently intended to be a mass market product.
“There is no credit interest payable, no financial incentives or monthly rewards and no cashback on direct debits – this is a bank account which enables you to manage your daily life and doesn’t come with complex charging structures or bells and whistles that you don’t really need or use.
“Not all consumers choose a bank account based on ‘what’s in it for them’ some will happily pay the small monthly cost safe in the knowledge that their bank is using money for socially responsible and ethical purposes.”