Ethical banking

Can you do good with your bank account?

When you put your money into a current account or savings, it doesn't just sit there. Ethical banking allows you to have a say in how your money is used and to support causes important to you. However, there are still limited ethical banking options in the UK, and banks rarely offer a current account option. This guide covers what ethical banking is and what accounts are available in the UK.

What is ethical banking?

'Ethical banking' has a range of definitions, but it's generally considered to be choosing a bank that follows a set of principles or goals in an attempt to improve the environment and society. This could be a bank that refuses to invest in the mining of fossil fuels, or one that provides affordable loans to charities.

It can also mean looking at the way a bank is run too. For example, do they pay their staff the real living wage rather than minimum wage? Are they paperless? Are they transparent about which industries they invest in?

When you deposit money into your current account or savings account, it doesn't just pile up in a big vault somewhere. The bank makes a profit by investing your money in businesses, for example, or by giving loans to individuals or charities. When you choose a bank specifically on its ethics, you're having a say in what your money helps to fund.

If particular ethical principles are important to you, it's worth taking the time to research a bank's investments and ethos to ensure you're happy with how your money is being used.

What makes a bank ethical?

'Ethical' means different things to different people. You might decide that a bank focused on reducing climate impact is a better fit for you than a bank that avoids investing in gambling or animal testing  or vice versa.

Signs that a bank is attempting to be ethical include:

  • Transparency. Some banks are more open than others about the areas they invest in and their internal business practices (such as working and pay conditions).
  • Avoiding investing in particular industries. Some banks will actively avoid investing in certain industries they consider particularly harmful. These include mining fossil fuels, arms dealing, gambling websites and animal testing.
  • Actively investing in the local community or third sector.
  • Ethical business practices. Being climate-focused as well as people-focused, for example, operating a paperless business, and paying all their staff a real living wage.

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Ethical banks offering UK current accounts

There aren't many completely ethical banks in the UK, and only a couple have current accounts. Here we've listed the most ethical banks, according to Ethical Consumer's rankings, that offer current accounts.

Bank
(Ethical score)
Current account details
Triodos Bank
(13.5/20)
The current account costs £3 a month - the bank says it prefers to share the cost of banking across all customers, rather than offering free banking to some and charging high interest to others. You'll also get a biodegradeable debit card.
Nationwide Building Soc
(13/20)
Nationwide's FlexDirect current account offers a year's 0% overdraft, which is great if you need a respite from interest to be able to pay it off. If you don't pay it off within a year, you'll pay 39.9% EAR. 

Nationwide also offers a top pick packaged account, and currently £200 to switch.
Co-operative Bank
(12/20)
Open its fee-free current account and you get a bog-standard bank account that lets you make payments, pay bills and withdraw cash. Plus, if you add Everyday Rewards to the account, you could get £2.20 cashback each month.

The bank also offers a decent packaged account.
Cumberland Building Soc
(12/20)
The Cumberland Plus account is free if you can pay in £750+ a month - if not, it charges a £2 a month fee. It also has a relatively cheap overdraft, charging 14.99% EAR, compared with the 40% charged by most banks.

If you're looking for ethical savings rather than a current account, there's a lot more choice - and most of the providers score better in the Ethical Consumer ratings than the current account providers above. See our Ethical / green savings guide for full details.

Do ethical savings and current accounts work differently to 'normal' accounts?

If you have an ethical current or savings account, you can use it in pretty much the same way as a standard account – the main difference is what goes on behind the scenes. You'll still be able to manage your account online or in branch and (if it's a current account) use a debit card to pay for things as normal. (If you opt for a current account from Triodos Bank, that debit card will be biodegradable, made from renewable resources.)

However, some differences you might notice include:

  • There are fewer ethical current account options than there are savings accounts.
  • Slightly lower interest rates.
  • More regular updates from the banks about their business and ethical practices.

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