Authorised vs unauthorised overdraft fees question

I’m a little unclear on Monzo overdrafts. I see that if I have an arranged overdraft, i’ll be charged 50p per day that I’m overdrawn more than £20 with a max monthly pay limit of £15.50.

Seems straight forward.

However, on the help section in the app, on the “Unauthorised Overdrafts” page, it says the following:

If you don’t have an overdraft with us, we’ll try to reject any payments that would take you overdrawn. But we can’t reject all payments because some of them happen ‘offline’ (for example ones through TfL, or bills from hotels).

Most of the time, those payments will fall inside the £20 ‘buffer’ on your account, which we won’t charge you for. Meaning that you can go up to £20 overdrawn without any charges.

But if you’re overdrawn by more than £20, and you don’t have an overdraft with us, you’ll be in what’s called an ‘unauthorised overdraft’. If that happens, we’ll tell you through the app and you’ll have until midnight of that day to add some money. If you don’t pay it back in time, we’ll charge you 50p per day you’re overdrawn by more than £20, up to a maximum of £15.50 per month. We collect those fees on the first day of every month.

This seems to suggest if there is no overdraft authorised that the effects of going overdrawn are identical to what would happen if I had authorised overdrafts.

Surely there must be a difference between authorised and unauthorised overdrafts. So what’s the point in arranging authorised overdrafts? What am I missing?

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Transactions will be rejected unless they are offline payments (eg Transport for London) if you don’t have an overdraft arranged or you max out the overdraft. There are very few places your card would be accepted
Price is the same as it stops unfair bank charges


Ah so it’s only the attempt at rejection that’s different. Thanks for clearing that up.

I’m surprised Monzo makes a differentiation to be honest. Tom was pretty scathing about the concept of an ‘unauthorised’ overdraft.

Might this be a regulatory or legal thing? They’ve gone out of their way to make them as identical as possible, so if the terms could be the same they probably would be.

(Actually, is there a difference in terms of credit reporting for unauthorised overdrafts? Doesn’t an unauthorised overdraft give you a black mark on your credit history?)

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Well, only if Monzo decide you’ve breached some internal ‘limit’. The CRAs don’t judge what you’ve borrowed from your bank is ‘authorised’ or ‘unauthorised’.

I guess any other lender could deduce a customer was beyond what was previously agreed, by comparing the account overdraft limit with the actual negative balance on the credit file, but that would only happen if the negative balance coincided with the point of the month when the figures were sent over to the CRAs. I don’t think Monzo has to make a differentiation.

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