The past couple of weeks have been bad ones for the UK’s big banks – first there were the massive computer problems at the Royal Bank of Scotland Group. Then it emerged that Barclays staff had been trying to rig interbank lending interest rates.
As a result, many comparison sites and research companies have reported a big jump in the number of people switching bank.
You too might be disillusioned with the banks as a result of all this negative publicity. What you definitely shouldn’t do is ditch a bank account altogether. Most employers pay via bank transfer and a bank account is far safer than stashing your money under the mattress, literally or metaphorically.
But if you are determined to move away from the big high street banks, there are several alternative places to put your money. Here are some of them.
Building societies
There has been a marked increase in people switching their accounts to building societies over the past few weeks. Unlike banks, these organisations are not beholden to shareholders; instead they run for their members – at least so the theory goes.
And while most of the building societies don’t offer freebies or incentives for joining, they do offer all the basics you’d expect for free, such as online account access, a debit card and a cheque book.
Nationwide, one of the biggest building societies, does offer some incentives, namely free European travel insurance if you open its FlexAccount and credit it with at least £750 a month. It also offers discounts on a range of big brands via its Simply Reward programme.
'Ethical' banks
There are several UK banks that you won’t find on most high streets that have some sort of ethical goal, whether it’s community-focused or environmental. However, of these, only the Co-operative Bank offers current accounts, via the bank itself, its smile online arm and Britannia Building Society.
The Co-operative Bank offers three current accounts. There's the free Current Account Plus, which comes with a fee-free overdraft buffer, providing you credit the account with at least £800 a month. There are also a couple of packaged options – the Privilege and Privilege Premier. These offer a range of benefits, including worldwide travel insurance and mobile phone insurance. But you’ll have to pay a monthly fee for the privilege of having one, so make sure you're sure the benefits are worth it.
Credit unions
A credit union is a not-for-profit financial co-operative that borrows and lends money to its members. They are run by volunteers. Some have been set up to help a particular area or community; others are open to groups of people with the same occupation (for example a police force) or interests. This is referred to as a ‘common bond’.
If you want to join a credit union, you generally have to share that common bond with its members.
Some credit unions now offer current accounts. These allow wages and benefits to be paid into the account and offer Direct Debit, standing order and bill payment facilities.
Many of them also come with a debit card you can use to withdraw money from ATMs and make payments.
However, most credit unions charge a monthly fee to run the account. This is usually around £3-£4. So they’re not an option if you want free banking.
If you want to find your nearest credit union, there's a directory on the Find Your Credit Union website.
Find out more about the other services credit unions offer in Credit unions explained.
Before you switch
If you do want to switch your money somewhere else, you should be aware of any overdraft arrangements you have in place. You will have to pay back any authorised overdraft in full before you can switch. If you need that buffer, you should think carefully about whether you can afford to switch to somewhere else that may not offer it.
More on banking
Thinking of switching to another bank?
Packaged accounts: is your current account worth paying for?
Should free banking be abolished?