‘Radical reform’ of overdraft charges are planned by the Financial Conduct Authority. We tackle the gap between perception and reality of ‘free banking’.
“Why is there a monthly charge for the Triodos Personal Current Account?” It’s a question we’re often asked since we launched the account in 2017, and the answer is down to our founding principles of ethical behaviour and sustainability.
We think banks that offer ‘free’ accounts cover the cost of running them with high penalty charges and hidden fees. Typically, these come from customers going – however briefly – into unauthorised overdraft. So it’s often the most financially vulnerable customers that pay the price for ‘free banking’. Which in our minds, is an unjust and questionable practice.
There is a gap between the perception that banking is free and the reality. Here are some of the statistics that have informed our perspective on fees and charges:
- The 2018 FCA's High Cost Credit review showed Banks made £2.4 billion a year from overdraft fees in 2017.
- Debt charity Stepchange reports financially vulnerable people are paying up to £225 a year in bank charges. And more than 2 million people in the UK are permanently overdrawn, with many trapped in a ‘vicious cycle’ of borrowing.
- Which? highlighted the ‘sky-high’ fees some banks are charging for unarranged overdrafts – up to seven times higher than those for payday loans.
True to our values of transparency, Triodos has made a point of being upfront about the true cost of running a current account and the way we apply fees and charges. So all our current account customers share the cost equally and pay a flat £3 a month for the service they receive: including online banking, ATM withdrawals, unlimited money transfers, eco-friendly contactless debit card, cheque books on request, a friendly UK-based customer service team, and all the essential banking services you’d expect.
We do not to offer unauthorised and unplanned overdrafts. Instead, we are following best practice by offering ways to carefully manage money – such as SMS alerts and a mobile banking app – to warn you when you’re close to the red. And we encourage sensible planning for any credit needs, providing arranged overdrafts when we can, by request with one simple interest rate charge.
Look at it this way: just as organic food represents the ‘true cost’ of food production, we’re being transparent about the true cost of running a current account (though in truth, at our current size the monthly fee doesn’t fully cover our costs to run an account).
The idea banks can offer free account services, while generating large profits by charging often financially vulnerable customers excessive charges, doesn’t seem right or fair to us. No other bank in the UK has been bold enough to say this as we have done. This stance is partly why the Daily Telegraph has named us ‘Britain’s first honest bank’. It’s a title we’re very proud of.
THE TRIODOS CURRENT ACCOUNT
Our mission at Triodos Bank is to make money work for positive social, environmental and cultural change. Where you choose to put your money, and how your bank uses your deposits, can reflect your values and we only lend money to organisations and projects that are making a positive difference to society. We’re the only 100% transparent bank – publishing details of every organisation we lend to, and invest in, so you know exactly where your money goes. That’s why Ethical Consumer, the UK’s leading ethical and environmental magazine, has rated the Triodos Current Account as having the highest ethical and environmental standards of any current account available in the UK.