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Ethical current account launches costing £3 a month: how does it stack up?

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Written by: Paloma Kubiak
26/04/2017
Ethical lender Triodos Bank has today launched a current account charging users a monthly fee. Is the account any good?

The sustainable bank has today opened registrations for its first ever UK personal current account with the view to roll out the service from June.

Triodos said it’s launching the account in response to growing consumer demand for banking products that “demonstrate a positive impact in society”. It lends savers’ money to organisations which put people and the planet before profits, and aim to make a social, environmental or cultural impact in the community.

The bank wants to ‘shake up’ the sector by challenging the ‘myth of free banking’. It will charge users £3 a month for the service.

Huw Davies, head of retail banking, said: “Cards and banking don’t come for free. We’re providing a fairer and more equitable approach so that everyone pays a small charge to cover the costs that we all incur. We’re completely transparent with our charges and show every loan. We won’t charge exorbitant penalty fees which are often levied against those who can least afford to pay them.”

While other major banks often incentivise customers to switch by offering cashback deals, monthly rewards or in-credit interest, Triodos Bank said these ‘free’ accounts are usually subsidised with high penalty charges and hidden fees. A recent investigation by the Competition and Markets Authority revealed that high street banks make approximately £1.2bn from customers stumbling into unauthorised overdrafts.

What do customers get for £3 a month?

Unusually, the Triodos current account pays no interest, no cashback switch incentive or monthly reward and there is no unarranged overdraft facility. Instead if you accidentally go over your agreed overdraft limit, you’ll be charged an unpaid item fee of £5 with the maximum monthly charge capped at £50.

Users can request an arranged overdraft facility up to a maximum of £2,000 which is subject to a rate of 18% EAR.

Davies explains that Triodos is “not trying to be top of the market” but has a “competitive product that does what people need to do with their money”.

One of the major benefits of the Triodos current account is that the debit card can be used globally at LINK ATMs accepting MasterCard. Users can withdraw up to £300 and the withdrawals are subject to a 2.50% fx loading fee.

As the bank is committed to sustainability, the contactless debit card is made from a ‘natural plastic’ – PLA – of renewable resources, often corn and other plants.

The bank currently has around 50,000 retail customers in the UK, (650,000 EU-wide) but hopes to double its UK base in the next couple of years, appealing to those who really want their money to help the community and environment.

Triodos’ UK managing director Bevis Watts, said: “We want people to really think about what their bank is doing with their money. Money doesn’t have to be invested in the arms trade, fossil fuels and tobacco, it can be used to do good things that help build the society we want to live in.”

Other points to note

The current account can only be operated and opened online and via app, though the bank can help customers via the telephone. There are no bank branches but Triodos said it is in discussion with the Post Office to offer over-the-counter services to customers.

Triodos is signed up to the Current Account Switching Service which means customers moving their current accounts to it should see the process take place within seven days.

Triodos Bank has operated in the UK since 1995 but is based in the Netherlands. UK customers are protected by the Dutch equivalent of the Financial Services Compensation Scheme (FSCS) up to €100,000. See YourMoney.com’s ‘Should I entrust foreign banks with my savings?’ for more information.

How does it compare to other accounts?

The Triodos personal current account comes with no frills, gimmicks or incentives and Andrew Hagger of MoneyComms said too many rival banks have used interest or rewards as a means of trying to lure new customers, particularly while UK savings rates are so low.

“Unfortunately, such models have proved unsustainable with Halifax, TSB, Lloyds Bank and Santander all slashing their credit interest/rewards programmes in recent months,” he said.

Looking at the agreed overdraft charging structure (18% EAR), Hagger said the Triodos account ranks in seventh place out of the 16 main banks and is considerably cheaper than many of the bigger high street brands – including Santander, Barclays, Lloyds Bank, TSB, NatWest and Halifax all of which use an element of expensive and often punitive fixed fee charging as part of their overdraft tariff.

“Someone with a Triodos Bank agreed overdraft of £600 used for seven days each month would incur overdraft charges of £23.06 per annum compared with £84 at Santander and Halifax or £96.30 with TSB and £97.24 with NatWest/RBS,” Hagger explains.

Turning to the cost of unauthorised borrowing, Hagger said the £5 unpaid item fee “simply covers the costs the bank incurs” and as the monthly maximum is set at £50, it compares favourably against the major banks as 11 out of 15 charge £60 or more per month.

Debit card charges outside the UK (2.5% purchases and cash) are competitive and Triodos ranks third out of 16 banks (after Metro Bank and Nationwide Building Society).

Based on a two week family holiday with a total spend of £2,250, Hagger said Triodos would charge around £56.25 which is far cheaper than banking giants Santander, Lloyds Bank, TSB and Halifax all charging £98 or more.

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