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How to choose the right bank for your charity

Choosing the right bank account is an important decision for any charity.

Choosing the right bank account is an important decision for any charity. But, given the range of options available, it can be overwhelming. Especially, if you work for a smaller charity without in-house finance expertise. 

As the 2024 Charity Banking Challenges report shows, nearly a third of charities (32%) have found it difficult to open accounts with a new bank, increasing frustration across the charity sector with retail banking services.

You know having a bank account is essential for your charity’s long-term success – helping you to protect your money, and access funding too. Given most funders will only consider awarding grants to charities who have a bank account, as part of their fraud prevention measures. Similarly, if want to claim Gift Aid, you must be registered with HMRC and, again, have a bank account.

Your supporters also want the option to donate in convenient ways for them, be it online, or via cheque, or BACS – all options that require a bank account for you to receive and process those funds.

So where should you start? In this article, we explore some of the most important points for you to consider when you are when choosing a bank account, and what to expect when the paperwork is done.

1. Reputation and financial stability

When researching banks, it is important to check both their reputation and financial stability. 

Useful research on charity and community bank accounts, includes the Charity Excellence Framework’s annual survey. Among other user-led surveys out there, the market researcher, BVA BDRC also produces regular service quality reports, monitoring retail banks’ business banking services.

Both reports rate banks based on customer feedback, covering categories including service quality, relationship and account management, and online and mobile banking services and more.

It is important that your bank is regulated by the Financial Conduct Authority (FCA) and that your money is protected by the Financial Services Compensation Scheme (FSCS). The FSCS is the UK’s deposit guarantee scheme and protects eligible deposits of up to £85,000.

 

2. The specialised services available for charities

The Charity Banking Challenges report found that one of the biggest issues respondents face is a lack of knowledge and understanding from their banks around how charities operate, such as essential governance requirements, ways of working and operational structures.

Based on responses from just over 1,800 charitable representatives, including trustees and volunteers from small to medium-sized charities, the 2024 survey found that 92% of respondents experienced one or more issues related to their banking and 29% stated that a requirement to provide personal information for all trustees – not just signatories – was problematic.

This matters because any time and effort you or your colleagues may need to spend dealing with banking issues is resource diverted from your core mission. So, it is important to assess and factor in your shortlisted banks’ understanding of the charity sector when you are making your decision.

 

3. The quality of customer service

Building on this, at smaller charities, it is often volunteers or trustees who are dealing with the day-to-day financial management, alongside multiple other demands on their time and focus. 

One of the most important things to check, therefore, is that you will be able contact, access and get what you need done with your bank, with minimum fuss and stress. For example, 77% of respondents in the Charity Banking Challenges research found changing signatories or mandates (a document outlining who can operate the bank account) difficult.

Identify banks that give you a range of contact options, so it is easy to get in touch, and solve any potential issues, such as by email, webchat, or by telephone. Also look at how their customer service is rated by those who bank with them. Usually, you can find this on a bank’s website, on Trustpilot, or through speaking to other charities about the quality of service they receive. 

 

4. Robust financial protection and fraud prevention measures

Banking scams are increasingly common, and charities are not immune. Make sure you are aware of how to spot and avoid banking scams. In addition, you need a bank that will protect you and help you to detect fraud. As your starting point, choose a bank that has clear fraud detection processes in place, offers two-factor authentication, dual authorisation on payments and provides secure payment processing.

 

5. The opportunity to invest ethically

Searching out a bank that aligns with your values will also help you in your charitable work, especially when it comes to investments. As part of your research, check to see if potential banking partners invest in areas that align with your purpose, or not. 

It is always important to ask yourself if your charity would be comfortable with your funds being invested in these ways? For more guidance, you can also explore our article on six questions that charities should consider before investing.

Sustainability is of growing importance across the banking and charity sectors, and you can check out your bank’s green credentials via Bank.Green.

 

Banking with purpose

Having a bank account is a necessity for charities. By following these recommendations, you can find a bank that is right for your organisation. A bank that aligns with your organisational values, is financially stable, understands the charity sector and how charities operate, has excellent customer service, and invests funds ethically. Charities exist to make the world a better place. We think your bank should too. 

For more information about the full range of products offered by CAF Bank, click here