This topic has always been one that interested me - I don’t think a fixed fee is particularly fair unless you’re borrowing the top of the band (or the maximum available to you, if there is no band).
Years ago I banked with Halifax, and the fees IIRC were something like
£1 a day - up to £1,999.99
£2 a day - 2k to £2,999.99
£3 a day - 3k plus
I had a £4k limit (madness in itself…). My funds (note, not salary!!) weren’t being paid into that account, so it literally was a constant balance (that obviously got worse when I ran out of money elsewhere, or when charging day came along)
I was stuck at -£500 ish for quite a while, being hit with £1 a day, which I thought was fairly steep (‘simple’ calculation of £365/£500 = 73%). It then upped and upped… with it not really costing me anymore. Before I knew it, it was £1,800… £365/£1,800 = 20% - not so bad, and the kind of typical arranged overdraft fee.
A few months later and fees came out, birthdays came around etc… I remember was one stage I was on something like -£2,020 so paying £2 a day… doubling my daily fee. I kept paying money in to stay on -£1,999 or thereabouts “saving” half the fee… then I got smacked with a fee at another bank for bounced direct debit.
Eventually, I was at £3k and £3 a day… so thought sod it, lets just take the full £4k.
Halifax (eventually) had enough and pulled the overdraft and I ultimately defaulted etc - but I think the fixed daily charge on such a small amount initially did CONTRIBUTE TO (not cause!) my future problems.
I completely accept I was silly accepting the overdraft which was pretty much the same as my annual income, and for digging a hole as time went on - but I strongly believe interest based charging is better. To say people don’t understand interest rates is extremely worrying, and strengthens the case for financial education in schools!
I welcome the review, and really hope Monzo will look at alternative charging (I have an OD with Monzo, but this time would use it as it’s intended… i.e. short term!). Even if that does mean paying 50p to borrow an extra £1 pushing me to -£21, I’d rather do that than get “value for money” and start the slippery slope again!