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Our guide to helping you understand charity bank accounts.
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What is a charity bank account?
Charity bank accounts, sometimes grouped with club, society and community interest bank accounts, are specifically designed with charities in mind. Unlike personal and business bank accounts, they're designed to only be opened in the name of a registered charity.
While you can use a personal account for charity finances, a dedicated charity bank account will help to keep your finances separate from your own, alongside many other features.
Which is the best charity bank account?
To find the ideal bank account for your charity, you should first consider whether you're eligible to open a charity bank account and which banking features you require, such as a high-street branch, chequebook or access to credit facilities such as an overdraft or credit card.
Once you've assessed which features you need from a bank account, your next step is to compare bank account features and benefits to find the one that suits your needs. You may find that a business bank account includes everything you need, and as you don't need to be a registered charity to open a business account, this might be a good place to start your comparison.
Opening a charity bank account
It's not essential that you open a charity bank account to look after your charity finances, but the main benefit is that you'll gain access to features that have been designed with charities in mind. With the proliferation of open banking, it's likely that you'll be able to replicate the features of a charity bank account with a regular business account, which as with a charity bank account, you can set up in the name of your charity and keep your personal finances separate.
Charity bank account features
Charity accounts typically provide similar features to business bank accounts, including the following:
A personal banking manager
Free electronic transactions
Mobile banking apps
Accept incoming donations and bank transfers
Make ad-hoc or recurring payments by card, bank transfer or cheque
Depending on the bank you choose, your charity could also benefit from free everyday banking. Although, some banks will charge a monthly fee for providing an account. There are many offers available for new charity bank accounts, including fee-free business banking.
We can help you find a charity-friendly business bank account through our comparison service which allows you to quickly and easily compare a range of high-street banks and online banks.
Using a personal bank account as a charity bank account
While it may seem easier to open a new personal bank account instead of a charity or business bank account, it's generally not recommended that you do so. Aside from the importance of being able to separate your finances from your charity, if your charity faces financial difficulty, it could have a negative impact on your personal financial health
How to switch a charity bank account
Switching charity bank accounts is a pretty similar process to switching a business bank account, which means that you will be covered by a 7-day switch guarantee, which makes it easier to switch charity bank accounts.
Coupled with our service which helps you compare bank accounts, you could set up a new charity bank account in as little as 7 days without taking you away from your other more important tasks.
Even if you already have a great charity bank account, it's beneficial to compare other options every so often, as the features and benefits banks offer change quite frequently.
How to open a charity bank account
Opening a charity bank account follows a similar process to opening a personal or business bank account, but there are some subtle differences. Some charity bank accounts require you to provide a charity number before they'll open your account. The issue with this is that it isn't possible to register with the Charity Commission if you meet the following criteria:
Your charity is based in England or Wales.
If you don't meet these criteria, you may be unable to obtain a charity number and open a charity bank account. In this scenario, your best solution is to open a business bank account in the name of your charity.
The process of opening a business bank account as a charity or small business is straightforward. Most applications can be done entirely online, even for high-street bank accounts. When you apply for a business bank account as a charity, you'll likely be asked to provide the following:
The names and addresses of all directors
The charity's business address and contact details
An estimate of your annual income
Once you've provided this information, the bank will confirm your details and carry out a series of anti-money laundering and identity checks before opening your charity business account.
The benefits of business bank accounts for charities
With a business bank account, your charity can take advantage of dual-authorisation which the Charity Commission recommends as a fundamental financial control measure. With dual authorisation, if one person submits a transaction through your charity business account, another person within the charity will need to authorise it. The same goes for cheques, requiring two signatures to be valid.
The main benefit of a dedicated business bank account is that you can easily manage your finances, gain insights into your spendings and earnings, keeping everything separate from your personal finances. Some business bank accounts also offer free accounting software, which can be very useful to charities.
Most business bank accounts also include the following features:
Cards for specific members of your organisation
Online banking through a web browser or mobile app
The ability to pay cash into a local branch, post office or another convenient establishment
The potential to improve your credit rating through good account management