This article is based on my personal research and experience in making the switch to more ethical banking in Australia. It is intended for educational purposes only and does not constitute financial advice. You should always seek financial advice that is tailored to your personal situation and needs.
Choosing where to open my first bank account in Australia was not a deliberate decision. I’d arrived in the country in 2007 as an international student and needed an account to manage my money. Dealing with the challenges of identity verification without a history of residential records or a Medicare card was difficult enough. And learning more about the different available bank brands wasn’t a priority for me at the time. What’s more, all banks seemed to offer more or less exactly the same thing anyway.
So, I did what most people do in this scenario. I just walked into the nearest branch and opened my first Australian bank account with NAB. Over the years, I added a joined account with my partner, a savings account and a credit card. Staying with them was easy and convenient and I didn’t put much further thought into it.
As it turns out, I’m not alone with my banking set and forget mentality. 40% of Australians are still with their childhood bank and 1 in 5 people have said that they could not be bothered changing. In fact, more people file for divorce than switch their banks.
Why ethical banking matters
The thing is, where we choose to bank matters. Financial institutions invest our hard-earned savings – amongst other things – into loans to help small businesses and large corporations grow and expand. And if you care about environmental or ethical issues, these investments are unlikely to all be aligned with our personal values. For example, a recent report revealed that Barclays has financed $56 billion in new fossil fuel projects since January 2021.
In Australia, a similar picture emerges. According to the Australian Conservation Foundation and Market Forces, all big 4 banks continue to back fossil fuel projects until at least 2030. So, if you’re banking with them, you’re inadvertently supporting sectors you may otherwise be trying to avoid.
The good news is that there are many ethical banking options available in Australia. Based on insights by Market Forces, there are at least 60 banks in Australia with no record of fossil fuel funding since 2016 who have also explicitly made divestment a part of their mission statement.
Big bank brands and the perception of security
As someone who graduated university right in the middle of the Global Financial Crisis (GFC) though one question did make me a bit nervous about switching to a smaller and perhaps less well-known ethical banking brand: is my money going to be safe?
Even though I knew at least since the collapse of Lehman Brothers that there is no such thing as too big to fail, there was something about the might of the brands that projected a sense of security.
However, a little bit of research quickly revealed that Australian banking industry regulation protects my money via the Financial Claims Scheme. FCS provides protection to deposit-holders with Australian incorporated banks, building societies and credit unions for deposits of up to $250,000.
Choosing an ethical banking option
With the security question out of the way, it was time to decide where I wanted to switch to. In the end, I decided to go with Bank Australia mainly because they have made their ethical values such a central part of their messaging.
Bank Australia does not invest in fossil fuels, live export, the arms industry, gambling or tobacco – all sectors I was honestly a bit surprised I had to make an explicit choice that I did not want to see my money invested in.
Other factors that got me over the line were that Bank Australia is a certified BCorp that started life in 1957 as the CSIRO Co-operative Credit Society. It joined with 71 other credit unions and co-operatives to become Australia’s first customer-owned bank in 2011. The company does not pay executive bonuses and is not listed on the stock exchange. Instead, every customer has one equal share, has voting rights at their Annual General Meetings and gets a say in where money is invested through their Impact Fund. Profits are returned to customers in the form of competitive rates, fair fees and quality products and services.
It’s a model I have not seen elsewhere and found so interesting that I even read their annual report. Definitely a first for me.
Switching over your accounts is easier than you think
The one thing I was probably dreading the most in this whole project was all the admin of changing my payment details absolutely everywhere.
Luckily, it turned out to be much easier and more seamless than I had anticipated. I also made sure to give myself enough time for the process to iron out any potential issues. Here are the steps I took to make the switch to more environmentally-friendly banking:
Step 1: Open new accounts with the bank of your choice
Opening a bank account is pretty straightforward these days and can be done online or over the phone. If you’re opening a joined account you will have to make sure the other person is available to speak to the bank to provide their consent. In the case of Bank Australia, my partner also had to set his own account up online first to be able to open a joined account. The process for this may change a little from bank to bank.
I also opened a separate savings account that offered slightly better interests than a normal everyday account (even though interests are on the low end everywhere at the moment).
Step 2: Change your details for incoming funds and transfer funds from your old accounts
Next, I changed my banking details for any incoming funds such as salaries. I also transferred all existing funds and savings from my old to my new accounts. This meant that I had enough cash in there to also start changing over the details for my outgoing payments.
Step 3: Change your details for outgoing payments
The easiest way to know exactly where you need to update your details is by reviewing your bank statements from the last 12 months and making a list of payees. This usually includes:
- Loan repayments
- Health & other insurances (e.g. roadside assistance)
- Online payment apps such as. PayPal, Google Pay, Apple Pay
- Charities and club memberships
- Newspapers and Magazines
- Netflix, Spotify and other content subscriptions
I did also give myself some overlap time between accounts to make sure nothing important was missed. But to be honest, once you have ticked off all the most important outgoings, the worst thing that can happen is that payment with your old details gets declined and you get a notification to update your details.
Step 4: Close your old bank accounts
The last step is to contact your old bank to request the closure of your old accounts. This will likely need to happen over the phone. At least, in my case, there was no option to close accounts online. However, the process was relatively painless and nobody at my old bank tried to talk me out of it.
Once that is done, you can give yourself a pat on the back for making the switch to ethical banking.
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