Banking on ethics does not have to cost the earth

Madonna, Genesis, James Blunt and the Red Hot Chilli Peppers will be among the stars headlining next month’s Live Earth shows around the world.

July 7th will see seven concerts watched by more than two billion people as the burning issue of climate change is brought home through music.

Live Earth follows on from last year’s Live Eight shows organised by Sir Bob Geldof and Bono and demonstrates yet again that millions of us are happy to put our money where our mouths are on major global issues.

But how many of us are willing to put our principles before our cash when it comes to day-day investing and banking? MoneyExpert looks into the greener issues…

Ethical banking

Recent research from consumer campaigners Which? shows one in 20 of us put ethical investing at the top of the list when choosing a bank.

That works out at around eight million UK adults who say a bank’s principles are more important than the interest it pays out or the fees it charges.

In fact the research shows four in 10 Which? members would be willing to accept lower rates of interest on their cash as long as their bank invests ethically on their behalf.

Women are more ethical than men – 47 per cent of them will accept lower interest rates in return for ethics while just 36 per cent of men would do the same.

In fact more than 50 per cent of men say they are not interested in ethics – they just want as high a rate of interest as possible.

Put your ethics first

Of course all banks will tell you they are entirely ethical and will point out that they are there to make a profit while providing the best possible deal for customers.

So do you have to lose money in order to prove you are ethical?

Co-Op Bank and its internet business Smile operate to strict standards of ethical investing and anyone with cash in these businesses can be happy they are doing the right thing.

Their Ethical Policy explicitly states that since 1998 they’ve not invested in any company involved in extracting or producing fossil fuels.

They’ve had an Ethical Policy since 1992 but as they point out on their website they’re the only High Street bank with one.

They offer Green Mortgages which donate cash on your behalf to Climate Care, Eco-Insurance which offsets car emissions and charity credit cards.

Play your cards right

Charity credit cards are the easiest way to prove your ethical credentials with around 40 cards on the market.

Everyone from Greenpeace, Help the Aged and Save the Children to the National Trust and the World Wildlife Fund has credit cards. Children in Need offers one through Nationwide Building Society.

Generally they’re not the best around – typical rates if you’re borrowing cash are 18.9 per cent compared to the average of 16.1 per cent.

So you are going to suffer to do good but not that much.

Compare charity credit cards

Making your cards count

Typically charity cards pay a donation to the charity when you take it out. That can be around £15 with another £2.50 if you use the card within six months. After that it can be as little as 15p or 25p for every £100 you spend on the card.

So if you spent £2,000 in a year after taking the card out the maximum the charity would receive would be about £22.50.

It doesn’t cost you much so it could be a good deal. But there are other ways to give money to charity.

Doing it yourself

You can set up a direct debit to your favoured charity from your own bank account and the Government will chip in if you are a taxpayer.

That happens though the scheme known as Gift Aid. Basically charities can reclaim the basic rate of tax on your donation.

So if you donate £100 to a charity it can reclaim the basic rate of tax and your £100 is worth around £128 to the charity.

You need to fill in a Gift Aid declaration – and you can reclaim tax going back to the 2000 tax year.

That beats most charity credit cards and helps you be ethical on your own.

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