Triodos launches ethical current account

Triodos Bank, one of the UK’s banking minnows, is joining the current account market with a new account aimed at those of us who want to bank ethically.

“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 live in,” says Huw Davies, head of retail banking at Triodos Bank.

In practice the bank lends to charities, community schemes, renewable energy programmes and homelessness programmes.

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If you are suspicious of just how ethical it is – and who wouldn’t be suspicious given the practices of some members of the British banking community – you can see details of every single loan it makes at www.knowwhereyourmoneygoes.co.uk.

This ethical stance has won Triodos Bank plenty of customers, but they have also been attracted by its reasonable savings rates – 0.75 per cent for an instant access ISA isn’t table topping, but is competitive.

Now the bank is launching a current account, but aside from holding your money with an ethical bank there is little else to attract you to the account. For a £3 monthly fee you get a current account that doesn’t pay you any interest and charges you 18 per cent if you use an arranged overdraft.

Triodos Bank trumpets the account as being different because it won’t let you fall into an unauthorised overdraft then rip you off with fees. Instead the account does not allow unauthorised trips into the red. While you can have a prearranged overdraft, if a payment is going to take you beyond your arranged overdraft it will be rejected.

But, every time the bank rejects a payment there is a £5 charge, capped at a maximum £50 a month. That’s a pretty hefty charge when compared with other banks that charge £5 a day for going into an unauthorised overdraft no matter how many payments go out that day.

If you want to support an ethical bank then take a look at Triodos Bank’s range of savings accounts and ISAs that offer you a reasonable return in the current low-rate market.

But, if you are looking for a new current account on purely financial returns there are more rewarding options.

Anyone who regularly has a high balance in their current account should look at Nationwide, Tesco Bank and TSB. Nationwide pays five per cent interest on balances up to £2,500 in its FlexDirect account while the other two pay three per cent interest.

If you regularly slip into the red then FirstDirect’s current account has a zero per cent £250 overdraft and you’ll receive £100 for switching at the moment.

Anyone with an overdraft they want to clear should look at Nationwide’s FlexDirect account which has an interest-free overdraft for the first year.