Where can you put your money if you don’t trust the mainstream banks?

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If you don’t want to bank with one of the big five banks, what are the alternatives? There are quite a few to consider – here’s a quick guide.

Where can you put your money if you don’t trust the mainstream banks? – the options

There are several different options if you want to switch from one of the big five high street banks. the big five are Barclays, HSBC, Lloyds, NatWest/RBS and Santander. Ethical bank Triodos has launched a current account today, so here are some of the main choices:

You could switch to a challenger bank

This category includes supermarket banks and digital and online-only banks.

It also includes M&S Bank, which does offer two different types of current account. The bank is wholly owned by HSBC. It has almost 30 branches within M&S stores. You get a minimum overdraft of £500 when you open the account (the first £100 is interest free). You also get 1 point for every £1 you spend on your M&S Bank debit card in M&S stores or online. You can also access M&S Bank’s monthly saver account, which pays 5% fixed for 12 months. You can pay in up to £250 a month.

Metro bank launched in 2010 and it currently has almost 50 branches – mostly in and around London. You can open a bank account in a branch the same day. It offers personal and business accounts. The personal account is free to use if you’re in credit and you won’t get charged fees for using your debit card in an EU country.

Tesco Bank offers a current account, which pays 3% on balances up to £1,000 until 1st April 2019. However, you must pay in at least £750 a month and have three direct debits set up. Tesco Bank was hacked in November 2016 which affected 9,000 customers, although Tesco Bank made sure that no-one lost out by compensating customers.

Virgin Money offers a basic bank account called an essential current account. Its website says it’s planning to offer more current accounts in the future. You can register your interest to find out more about these accounts.  It has around 80 branches (it calls them ‘stores’).

You could switch to a building society

Not all building societies offer current accounts although the largest ones (including Nationwide and Yorkshire building society) do.

The advantage of a building society is that it’s a mutual organisation, which means it’s owned by its members (there are no shareholders). But just because the organisation is owned by its members doesn’t guarantee it will be run well or entirely in its members’ interests.

SAVVY TIP: The building society Norwich & Peterborough offered a current account which proved popular, but in January 2017 it decided to close all 100,000 accounts by August. All customers will have to switch to a new current account provider.

You could switch to an online or mobile only bank

There are a number of online only banks that have either launched or are going to.
These include Atom Bank,  Fidor Bank, Monzo Bank and Starling Bank.

SAVVY TIP: Be aware that Fidor Bank is a German bank that has not signed up to the Financial Services Compensation Scheme (FSCS). Instead, your savings are protected up to €100,000 by the German compensation scheme.

You could switch to an ethical bank

The Co-operative bank is the biggest and best known ethical bank and it also owns the Smile internet banking brand. These both offer current accounts. However, the Co-operative bank’s future is in question as it is currently up for sale. Personally, I wouldn’t switch to it at the moment, because there’s no guarantee about what type of account it will be able to offer (or who will own it) in the future.

Triodos bank is an ethical bank which launched a current account today (April 26th). It’s been operating in the UK since 1995 and it also offers a range of savings accounts including cash ISAs and investments.

Triodos Bank’s website lists every business it lends money to so you can find out exactly who your money is supporting.Its parent company is based in the Netherlands. It is not covered by the FSCS, but your savings are protected by the Dutch compensation scheme, up to a limit of €100,000.

SAVVY TIP: Triodos Bank’s current account isn’t free but charges £3 a month. You can apply for an overdraft of up to £2,000 although it’s not offered as standard when you take out a current account. The arranged overdraft rate is 18%. The maximum you’ll be charged in any month for going overdrawn without asking is £50.

Ecology building society specialises in lending mortgages for sustainable building and refurbishment projects but it also has a range of savings accounts. Charity bank is a registered charity and bank which lends to projects that would find it hard to get traditional funding. It offers savings accounts including cash ISAs.

SAVVY TIP:  Ecology building society doesn’t launch any new products that existing savers can’t access and it doesn’t use introductory or bonus rates.

You could switch to a credit union

There aren’t that many credit unions in the UK and not all of them offer current accounts. Credit unions are owned by members and run for them. They offer low interest rate mortgages and some savings products. The Association of Credit Unions has a list of credit unions that offer current accounts on its website.

What to think about before you switch

If you want to move your current account, here are a few things to consider.

1. You don’t have to move all your banking to the same current account provider. If the flurry of IT breakdowns that besieged a few of the high street banks a couple of years ago has taught us anything, it’s that it may be a good idea to split your banking so you can access some money elsewhere if there’s a problem.

2. Check how your money is protected. Banks and building societies that operate in the UK normally have to be authorised directly by the Financial Conduct Authority (FCA). That means your savings are protected up to a limit of £85,000 by the Financial Services Compensation Scheme if the bank or building society fails. This applies to the smaller building societies and to credit unions and to many banks that have their headquarters overseas.

SAVVY TIP: Some financial institutions based in the European Economic Area can be indirectly regulated by the FCA (the system is called ‘passporting’) which means they can be covered by their home country’s savings protection scheme. Triodos Bank is covered by the Dutch compensation scheme. This means your savings are covered up to €100,000.

3. Make sure the new current account provider is signed up to seven day switching. You can switch your bank account within seven working days once you’ve opened your account with the new provider. There’s also a promise that if any of your direct debits or standing orders go to the wrong account, your new bank must sort it out. However, not all banks or building societies have signed up to seven day switching so it’s worth checking before you start the process.

Useful links:

There’s more information about where you can move your money on the website Moveyourmoney.org.uk.

If you’re interested in green and ethical options, I’ve written a book called Green Money; how to save and invest ethically

There’s also a website called Yourethicalmoney which has a section where you can find out how ethical your bank is.

Related articles:

Which banks are in the UK savings compensation scheme and do they protect £85,000 of savings?

Mobile banking – tips on how to bank safely

Understanding direct debits, standing orders and continuous payment authorities

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