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Wind turbines in front of coal-fired power plant cooling towers emitting steam steam
Big high street banks have long invested in fossil fuels while ethical providers focus on green alternatives. Photograph: Volker Hartmann/Getty
Big high street banks have long invested in fossil fuels while ethical providers focus on green alternatives. Photograph: Volker Hartmann/Getty

Can credit unions finally provide a truly ethical current account?

This article is more than 7 years old

The Engage account is for those who want their money to be used to do good. Plus, we look at the alternatives

Billions of pounds of taxpayer cash pumped in, PPI mis-selling, investing in fossil fuels or dodgy regimes, money laundering, Libor rigging, tax avoidance, excessive executive pay… the list of scandals involving banks goes on and on. So it’s no wonder that many people would like a more ethical home for their current account cash. But one problem is that there aren’t many options available.

However, things are changing. A current account has just been launched, available through selected credit unions, which offers most of the things you would expect from a 21st-century bank account, from a fully functioning mobile app to a contactless debit card.

It will mean more choice at last for those who would like to feel that their money is being used to do good (or at least isn’t being used to finance bad things). However, going down the ethical route can come at a cost, in the form of weekly or monthly fees and other charges the big high street banks don’t necessarily impose.

Credit unions are not-for-profit co-operatives owned and controlled by their members, and a number of them already offer current accounts, but until now they have been low key. However, the movement is now setting itself up as a full-blown challenger to the dominance of big banks with the launch of the Engage current account.

The account is unique because it is the first banking product available through a variety of UK credit unions that is offered as a single national brand, thereby helping unions raise their profiles and boost customer numbers, says Contis Group, the payments company that created it and which currently works with 141 credit unions.

The Engage account is aimed at people “who prefer a more ethical approach to finance”, as well as those who have been rejected by the high street banks. It is being offered by a handful of credit unions, including Lewisham Plus Credit Union in south-east London (which also trades as Bromley Plus Credit Union), Hull & East Yorkshire Credit Union and Hampshire Credit Union, with more due to sign up over the coming months.

Broadly speaking, the account works in exactly the same way as a high street bank account, except that you get it from your credit union, says Geoff Leech, the Engage account managing director. As well as offering banking via PC, tablet or mobile app, and a contactless Visa debit card, it allows people to set up direct debits and standing orders, withdraw cash from ATMs, transfer money etc. It also offers cashback of up to 15% when the card is used at participating retailers. However, there is no overdraft facility, which means no nasty charges as a result of going into the red, but also means the account won’t suit everyone.

Probably the biggest potential turn-off is the monthly management fee. Lewisham Plus and Hull & East Yorkshire both charge £5.95 a month, while Hampshire charges £2.25 a week. On top of that, Lewisham and Hull & East Yorkshire only allow two free UK ATM withdrawals per month. After that you pay 75p a time. So to avoid ATM charges you would either have to limit your cash machine visits or rely on cashback from shops.

Some might feel there is no point signing up to an account with a weekly/monthly fee when there is still free banking available on the high street. However, Leech argues: “Is there really such a thing as free banking? A lot of high street banks have stealth charges. If they don’t get your money one way, they’ll get it another.” He adds that there are already around 5,500 people using the Engage current account.

Alternative choices

The Co-operative Bank is the only UK high street bank with a customer-led ethical policy, covering a range of issues from the environment to animal welfare. It is offering £110 to people who move to its no-monthly fee current account via the industry’s switching service (which involves closing your old account) and port over at least four active direct debits.

However, the website of the Move Your Money campaign, which wants a banking system “that helps to build and support a just and sustainable society rather than undermining it”, only gives the Co-op a score of 51 out of 100. It says: “The bank’s majority ownership by hedge funds has placed question marks over the sustainability of its ethical lending approach, as have a number of serious difficulties that the bank has experienced over the past couple of years.”

Three providers that Move Your Money likes are Metro Bank (77/100), which has 48 branches (or “stores”), mainly within the M25; Handelsbanken (75/100), the UK arm of the Swedish bank of the same name with more than 200 branches from Inverness to Truro, each of which can decide its own terms and pricing; and Al Rayan Bank, formerly known as the Islamic Bank of Britain (74/100), which offers an “ethical and Sharia-compliant” interest-free account.

In terms of building societies, Nationwide scores 64 out of 100 on Move Your Money, reflecting its “excellent track record in contributing to the real economy and in ethical lending, partly thanks to its strict code of human rights standards on its supply chain”. Building societies are mutuals, which means they are owned by their members and tend to have a strong regional identity.

Meanwhile, green-minded folk might want to wait for Triodos (92/100) to unveil its personal current account. The Bristol-based bank, which has no high street branches, currently lends to businesses and offers personal savings products, but is launching the account “later in 2017”. Triodos will only lend to organisations “who put people and the planet before profits,” and publishes details of all its borrowers. Organisations include chef Hugh Fearnley-Whittingstall’s River Cottage HQ, Brighton arts venue Komedia and the Big Issue Foundation Scotland.

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