If Monzo don’t have overdraft fees, how are they going to make money?
Who says Monzo shouldn’t charge overdraft fees? We are discussing how it is being done, not that it shouldn’t be done. Monzo said clearly in the blog post above that they wanted feedback from the community.
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This is how Starling do overdrafts. What exactly is so confusing about this?
I would be paying £10 this month if it was 50p a day.
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I don’t know. Who said it? I didn’t. Sometimes a flat fee can make a little more cash than short term interest. So I think a flat fee is a good idea. Also good for budgeting. Easier. And Monzo is all about being easy.
I believe the £20 buffer only exists if you apply for the overdraft and technically, if you use it, you are overdrawn so it won’t stop you. I’m guessing that you mean it will stop you paying charges?
Overall, I’m in two minds. The flat fee is simpler to comprehend but may encourage more borrowing on the grounds already stated. The result of that will be a higher set of fees, however, as the greater borrowing will need longer to repay so in that sense, the flat rate looks more ‘fair’ than some suggest.
What I don’t know is if people will think of it in that way. I got caught in the mental ‘borrow £1 so borrow £1000’ trap for a while because I wasn’t considering repayment times so while a flat fee may be easier to understand for some, I still don’t think all of the ramifications are completely clear. Unfortunately, I don’t see much that can be done about it.
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Personally, I prefer the flat fee approach. I feel it makes things simple. You know exactly where you are with your overdraft.
As stated, this does benefit those with a larger overdraft but isn’t Monzo trying to be different in not punishing those who need financial help?
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Do we need to apply for the £20 free overdraft facility, or will that be available to everyone?
The blog post says:
“We’ve also built in a £20 buffer so that you can use £20 of the overdraft with no charges, for as long as you need. Charges will only kick in once you go below -£20 on your account balance”
so that looks like part of the package you have to apply for to me. Happy to be corrected since this is just an opinion.
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You stated…
Which I thought implies that the commentary was about not having fees. I apologise if I understood it wrongly.
Or encouraging people who are £20.01 overdrawn being charged £15.50 after a month thinking “I’m already spending £15.50 on my overdraft… whats will eating a little more of it harm me?” So they go further and further into the overdraft to the point they cannot repay the overdraft and are paying stuck paying a £15.50 fee every month. I’m not saying people with a financial brain wont pay it off, but it causes a slippery slope for those who do not.
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I’m another one somewhat disappointed with the 50p a day flat fee. Don’t want a big overdraft facility, just a couple of hundred pounds as an overdraft should only ever be used as a short term solution.
I prefer the way Starling have done it, I get only charged for what a borrow and, from experience, would be far better for me to use their overdraft facility than a Monzo one.
Still currently prefer Monzo over Starling in pretty much every other way.
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The interest “charge” shows as a negative for starters? Are they going to pay me money for using one 
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They don’t need an “APR”, they just need to say something along the lines of “1p per £10 per day”. That’s basically just as easy to understand as “50p per day” but a lot fairer.
It seems that Monzo are desperate to be different, even if it means being worse.
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That’s quite a pessimistic point of view though. I mean, I get where you’re coming from but I’m hard pushed to think there’s anybody who would think that being 1p overdrawn wasn’t sortable in some way that didn’t involve them paying more than 50p for the overdraft.
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Hey that’s OK. I know they have to make money via OD’s and I know the conversation is about the.best approach to charge. I think either a fixed cost or a % will work. A fixed cost would not be as cost efficient for people on a small OD compared to larger amounts through. That’s the downside.
Anyone know when we’re due to get the sign up emails for the overdrafts? I know the announcement said to look out in our inboxes yesterday but haven’t had anything yet…
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I received my email yesterday. Are you in the preview already?
Yup, in the current account preview! Had nothing so far…
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Ok in that case, until we hear otherwise, it’s probably best to ask the support team about this via the in-app chat.
Edit
Also a quick reminder - the overdrafts are currently only available to iOS users.
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@alexs I was at the Nottingham met up and asked @Naji about overdrafts - my position is that I can test them with no problem but don’t actually need one so maybe I’m not best placed to give feedback (as opposed to testing the functionality). Not everyone who has the CA card will be offered the overdraft facility at the moment.
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