I want an ethical account… but will I be worse off?

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I am thinking of opening an ethical bank account.

What are my options and will the change really make a difference?

Also, will I have to accept lower rates and poorer service and online banking than the high street giants offer? Motorhome, Essex

Options: Ethical banks strive not to lend money to more controversial businesses, such as gun or gambling businesses

Ruth Jackson-Kirby responds: When you deposit money with a bank or building society, they lend it to other customers and businesses.

You have no say in who your money is lent to. There is a risk that it will be used to fund things that you might not be happy with.

Ethical banks make it a point not to lend money to the most controversial businesses, such as gun or gambling businesses.

Each ethical bank has a different set of rules that define the types of businesses they will lend to – and not lend to.

Before choosing one, you will need to consider your own ethics and find an account that matches them.

There are several ethical banks and building societies in the UK and opening an account with one does not necessarily mean taking a step back in terms of service and technology.

However, if ethics aren’t your only consideration when choosing a bank, it makes sense to check online reviews of different providers before making your choice. If in-person banking is important to you, your options will also be limited.

If you’re looking for a new checking account, you have a few options. Triodos Bank will only lend your money to companies and organizations that have a positive social, environmental or cultural impact.

You can see exactly who Triodos lends to via a map on its website. Its checking account comes with online and app-based banking, as well as a biodegradable contactless card. However, it has a monthly fee of £3 and no bank branches.

Alternatively, Cumberland Building Society offers a Plus Checking Account with no monthly fee. It does not invest its members’ money in stocks and shares, eliminating the possibility of unethical investments.

Last year he donated £100,000 to local community, education and charity projects.

Some people consider building corporations a more ethical option than banks because they serve their members rather than their shareholders and tend to invest in their local community. Nationwide is the largest that offers a checking account.

One of the best-known ethical savings accounts is National Savings & Investments’ Green Savings Bond. The account invests your money in green projects chosen by the government.

These include building offshore wind farms, insulating homes, making public transport greener and accelerating the transition to electric vehicles.

The bond locks up your money for three years and pays 3% interest per year. That’s pretty competitive – the most generous three-year bond on the market yields 3.81%.

However, now may not be the best time to lock in your money for several years. Interest rates are rising and you may find your return less attractive in a few months.

For example, people who invested in the three-year Green Savings Bond last October only receive 0.65%.

Tandem Bank’s one-year fixed saver pays 3.26% and can be a good alternative.

The challenger bank was founded in 2014 but said it became an environmentally friendly bank last year.

He’s a little vague on what exactly that means, but by the end of 2021 he had given away £230million to help people improve the energy efficiency of their homes.

If you are looking for an instant access savings account, you can get an optimal purchase rate of 2.1% with Al Rayan Bank.

Although it is not a standard ethical bank, it follows Sharia banking rules.

This means that your money cannot be lent to businesses prohibited by Islamic law. In practice, this means that no company is involved in alcohol, tobacco or gambling, but it could be loaned to gas or oil companies.

If you’re willing to give two weeks’ notice before withdrawing your money, RCI Bank’s 14-day notice E-Volve savings account is attractive. It yields 1.7% – a best buy on a short-notice account.

The money deposited is used to finance the manufacture of electric vehicles and charging stations.

Finally, don’t forget the Cash Isa, which allows you to earn tax-free interest. Triodos Bank has an instant access Isa paying 1.15%, although this is considerably lower than the best buy rate of 1.85%.

Alternatively, Sharia-compliant Gatehouse Bank has a one-year Woodland Cash Isa that pays 2.5% interest.

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