Charity bank accounts: HSBC charges £5 a month – what options are there?

My wife is a Trustee of her own small charity and has had a charity account with HSBC for at least fifteen years. 

It has now told us it will have to charge £5 per month to maintain the account, having made no charge previously.

I have contacted a number of banks to see if they will take on the charity account for my wife’s charity including Barclays, TSB, Santander, Lloyds and Nationwide. 

All have said they are not taking on new charity accounts, although some of their websites state they will. 

After HSBC introduced a range of new charges on its account last November it appears that other banks began to restrict applications from charities looking to switch.

I have heard from Trustees of other charities that they are facing the same difficulties in finding a bank that will not (as used to be the case) make charges to charities – which is after all against charitable aims.

I would be grateful if you can consider this problem, which may be an extensive one across the country, and let me know if you have any suggestions please? Via email

Ed Magnus of This is Money replies: We have received a number of reader emails over the past few weeks relating to this.

HSBC introduced a range of new charges to those who hold charity bank accounts last November, most notably a £60 annual fee for running the account.

HSBC had previously allowed charities and non-profit organisations to manage their finances for free, as long as they made no more than £100,000 a year.

Given that around four in five voluntary organisations have incomes of under £100,000, according to the National Council for Voluntary Organisations, this will have likely have hit quite a number of charities.

The High Street bank also introduced new charges for branch transactions, including a 0.4 per cent fee to pay in and take out cash — £4 on a £1,000 donation — and 40p to deposit a cheque.

There is also a new 1.5 per cent fee when withdrawing change over the counter for fundraising events.

It appears that other banks have begun to restrict applications from charities looking to switch to avoid these new charges.

This has unsurprisingly left a number of our readers in quite a conundrum. We have put together a small selection of what we believe to be the best charity bank accounts to switch to.

Charity bank accounts are specifically tailored to charities and community organisations.

Although avoiding an annual fee is important there are other charges that charity account holders need to be wary of. 

Liz Edwards, editor in chief at Finder says: ‘The issue is that some charities, clubs and societies collect payments from members who like to use cheques.

‘But some estimates suggest that cheques are four times as expensive as electronic payments to process.

‘Furthermore, some accounts will charge for processing cash, and some will charge if you make over a certain number of transactions, so it’s worth looking at whether you could reduce charges if, for example, you made fewer transactions each month, and moved to fee-free methods for transactions.’

The best charity bank accounts

NatWest Community bank account 

Applications for new Clubs and Society accounts are open to those where one named person on the application holds a personal or business account or product with a NatWest Group brand.

The good news is that Clubs and Societies with turnover of less than £100,000 will receive an account free of charge.

This means no monthly account charge or transaction charges.

You will also receive online and mobile banking and free access to NatWest’s FreeAgent accountancy software.

Clubs and Societies with a turnover of between £100,000 and £2million will be on the bank’s standard tariff and therefore subject to charges.

Although its standard tariff still comes with no annual charge, it does come with a plethora of transaction charges, including 0.7 per cent fee for cash and cheques and a 35p charge for every debit card transaction you make.

When using the card abroad you will also face a currency conversion charge of 2.75 per cent.

Metro Bank Community Account

Metro’s charity account allows for 200 free transactions per month and free cash withdrawals or deposits up to £10,000 each month.

Metro Bank offers a charity account with no monthly fee, but there are conditions that need to be met.

After the first free 200 transactions each month you will be charged at 20p each. 

After the £10,000 buffer, for cash paid in, withdrawn, or exchanged a 0.7 per cent will apply. 

When using the card abroad, there is also no charge from Metro on European card purchases and cash withdrawals either so if for any reason your charity requires you to travel this could be useful.

Outside of Europe a 2.99 per cent currency conversion charge applies. 

Virgin Money Charities Choice Account

Charities with an annual turnover of less than £1 million will be eligible for free day-to-day banking and no monthly or annual account charge.

For those over £1 million fees do apply, including a £6.50 monthly account charge. 

It also comes with some perks. When you spend using your Debit Card with eligible retailers, Virgin automatically adds 0.35 per cent cashback credit to your account each month – this is capped at £500 per calendar year per Debit Card.

All charities need a deposit or current account to hold cash for the day-to-day running of the organisation.

It’s worth noting that Virgin also charges 2.75 per cent for overseas card use and withdrawals. 

Starling Bank Business Current Account:

Winner of ‘best British bank’ at the British Bank Awards four years in a row and gaining the highest number of net accounts through the switching service since the start of 2020, digital challenger bank Starling is increasingly a force to be reckoned with.

For any charity that is registered as a limited company, Starling could be a good option as any charity showing on Companies House will be eligible for one of Starling’s business accounts. 

There are no monthly fees or transaction charges in the UK. However, for those needing to deposit cash or cheque on a regular basis they will have to do so via the Post office as Starling has no physical branches. 

For cash deposits this comes with a 0.3 per cent fee, rising to 0.7 per cent from March. 

Although the minimum charge is £3 so you be wise to deposit large amounts in one go. 

It is possible to deposit cheques digitally via Starling’s app although cheques above £500 can also be sent via freepost or recorded delivery.  

Reliance Bank

For the first six months of banking with Reliance Bank, you’ll enjoy all the services that come with its current account for free.

However, there are a few conditions to be met first. You have to keep your account in credit, maintain an average credit balance of £5,000 and have no more than 25 transactions on average per month.

However, once the six months is up it might be worth switching again as you will then become subject to a £5 monthly account charge.

Any online payment will be subject to 25p each transaction whilst cash and cheques will be charged at 80p per £100.  

This post first appeared on Dailymail.co.uk