The Goliaths of banking face a new challenge

Fed up with scandals? There are alternatives, as Chiara Cavaglieri and Julian Knight report

Ask anyone what they think of their bank and many will use words such as "greedy", "unethical" and possibly add a few expletives.

The high-street banking giants – Barclays, HSBC, Lloyds, RBS and Santander – have been plagued by mis-selling scandals, rate-rigging, unfair overdraft charges, bonus rows and even a computer meltdown. But if you're looking for an alternative, what are the options?

With confidence so low, the current account market is there for the taking. Last year, Marks & Spencer Money launched an account and last week, the Post Office announced it is to trial an account in a small number of branches this spring before a wider roll-out next year. Virgin Money (having bought Northern Rock) and Tesco are also expected to enter the fray at some point.

"We know people want to switch from the dominant high-street banks. Customers are demanding more than criminal activity, mis-selling and big bonuses," says Laura Willoughby from consumer campaign moveyourmoney.org.uk. "Moving your money sends a strong message to the big players that enough is enough."

It may be tempting to stash your cash under the mattress but, realistically, we all need to receive and make payments. The good news is that if you are determined to abandon the Big Five there are options.

Building societies have already taken business off the banks with a stream of customers switching after last year's NatWest IT problems and Libor-fixing fiasco. The difference is that while banks are owned by shareholders and therefore driven to maximise profits, a building society is run for its members.

Not all offer current accounts and some only have a handful of branches but two of the largest include Nationwide and Norwich & Peterborough. The former offers the FlexAccount with incentives such as free European travel insurance and access to special offers on loans, savings and mortgages if you pay in £750 a month. The N&P Gold account is fee-free as long as you pay £500 in a month and comes with a debit card which is free to use abroad. The Building Societies Association has a full list of the UK's 46 brands (bsa.org.uk/aboutus/buildsocmember.htm).

Ethically driven banks, such as the Co-operative and Triodos, are another option and focus on greater transparency. "First, we show all our customers every loan we make and exactly how we use their money, so there is no confusion about what the money they deposit with us is being used for," says Huw Davies, the head of personal banking at Triodos.

"We only lend money to businesses that deliver a positive social, environmental or cultural impact. Moreover, we have a very clear bonus and remuneration structure – we don't pay contractual bonuses, and the ratio between the highest and lowest paid worker's salaries is just 9.5 times."

Triodos offers current accounts for businesses and charities but currently only the Co-operative offers customer current accounts (which are also available via its online arm Smile and Britannia BS). The Co-op Current Account Plus has no monthly fee – if you deposit at least £800 a month – and comes with a fee-free £200 overdraft facility and access to exclusive mortgage rates. It used to offer packaged accounts with benefits such as worldwide travel insurance for a monthly fee of £9.50 or £13 but these are no longer available to new customers.

Lesser-known banks may be worth investigating, for example, Handelsbanken is the biggest in Sweden but it also has more than 100 branches in Britain. It prides itself on offering a more "traditional" model by encouraging customers to have a relationship with their branch manager. Rates for all products are set on an individual basis and there are no call centres.

Metro was the first new high-street bank for more than 100 years when it was launched in 2010 and it offers a current account with free transactions abroad. Telephone and online banking is available and branches are open seven days a week, but these are only in and around London for the time being.

The Secure Trust Bank current account is open to anyone over 18, regardless of their credit history and instead of using financial market funding, it lends out less than it takes through deposits. There is no overdraft facility nor charges for bounced standing orders or direct debits, however, ATM transactions cost 50p a time, there's a hefty £12.50 a month to manage the account, and instead of a debit card you get a MasterCard Prepaid Card which you have to "load" with money before you spend.

Credit unions stand apart from banks for many reasons. First of all, they are not-for-profit co-operatives. They are also set up to borrow and lend money to people in a particular area, community, or to groups of people with a common bond such as the same occupation. A decent number of UK credit unions offer current accounts, although some charge a small monthly fee (Leeds City Credit Union charges 75p per week). Find your nearest credit union at findyourcreditunion.co.uk/home.

Before you make the switch ensure you know exactly what you're getting. Many alternatives have a clearing bank to run their systems, the Post Office, for example, is a partner of Bank of Ireland UK. M&S Money is owned and run by HSBC and it only offers packaged current accounts which cost from £15 a month. If you don't use all the incentives, such as loyalty points, £40 M&S vouchers and a £100 interest-free overdraft, forking out £15 a month could be a waste of money.

"When you're choosing a current account, consider what is most important to you," says Andrew Hagger of Moneycomms. "The four main areas are: overdraft charges, credit interest and rewards, the cost of using a debit card abroad and customer service."

You also need to take sort out the practicalities, for example, you will need to repay any overdraft in full before switching. The process should be straightforward – you set a switching date with the new bank who will request a list of direct debits and standing orders from your current bank (which has three days to comply). And a seven-day switching promise from September should make the process even easier.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Arts and Entertainment
Tony Hughes (James Nesbitt) after his son Olly disappeared on a family holiday in France
tv
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
Extras
indybest
Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Marketing Services Manager - (communications, testing, DM)

    £32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

    Guru Careers: Finance Account Manager

    £Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Day In a Page

    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas
    La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

    Deaf community outraged by La Famille Bélier

    The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
    10 best high-end laptops

    10 best high-end laptops

    From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
    Susie Wolff: A driving force in battle for equality behind the wheel

    Susie Wolff: A driving force in battle for equality behind the wheel

    The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
    Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

    'No abs Adam' plans to muscle in on Usain Bolt's turf

    After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
    Calls for a military mental health 'quality mark'

    Homeless Veterans campaign

    Expert calls for military mental health 'quality mark'
    Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

    Meet Racton Man

    Analysis shows famous skeleton was a 6ft Bronze Age superman
    Garden Bridge: St Paul’s adds to £175m project’s troubled waters

    Garden Bridge

    St Paul’s adds to £175m project’s troubled waters
    Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

    Stuff your own Christmas mouse ornament

    An evening class in taxidermy with a festive feel
    Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

    Joint Enterprise

    The legal doctrine which critics say has caused hundreds of miscarriages of justice
    Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

    Freud and Eros

    Love, Lust and Longing at the Freud Museum