Can I switch bank accounts if I have an overdraft?


(Beatrice Borbon) #1

Now that everyone has the option to switch to Monzo through the Current Account Switch Service, we answer more common questions around how to switch accounts:


Pot as overdraft
Pot as overdraft
#2

Do you think it might be worth mentioning that

Your bank should contact you to agree on a way to pay your overdraft back

in practice usually means that your bank tells you

You have 1 week* to pay back the overdraft in full.


* I made up the “1 week” bit, but it’s usually a matter of days, not months, and “agreeing with you” in practice usually means they tell you what you have to do.


#3

and normally days from the date of their letter, not from the date of it’s receipt!


(Peter Shillito) #4

I’ve been detailing the process of switching to Monzo while in an overdraft with Natwest over on Switch to Monzo and Help us Test the Current Account Switch Service and Natwest give you roughly 9 days to pay back your overdraft using the world’s shadiest looking WorldPay portal which then takes 5 working days to show up in your account (I paid on Thursday and it’s still showing the outstanding balance on my Natwest app).


(Michael) #5

It’s been nearly 2 weeks since I switched and Starling still haven’t contacted me on how to pay them back :frowning:


#6

They probably sent you a letter by snail mail, with the 7 day deadline for paying it back, dated the date after the switch. That deadline ended last Thursday, and you’ll get your letter some time soon - together with some debt collectors knocking on your door…


(Peter Shillito) #7

sounds like free money to me :laughing::laughing::laughing::laughing::laughing::laughing::laughing:


(Michael) #8

If any do turn up, they’ll get told to return the debt back to Starling to collect :stuck_out_tongue:

I have no problem with the amount, I just need a way to pay it…


(Jamie 🏳️‍🌈) #9

For those who have switched whilst in overdraft, and with the means to pay the overdraft back in full upon request:

What was the benefit to NOT simply repaying the overdraft before initiating the switch?

It sounds more complicated to have to pay back the bank (using dodgy Worldpay portals and snail mail) than just instantly crediting your old account a week earlier.


#10

And more risky. It’s absolutely possible that the request to pay back is sent via snail mail and arrives after the deadline (or not at all).

Quite frankly - and that’s what I was getting at with my first comment - it’s not really good advice to just “sit and wait” in this situation, and I think Monzo shouldn’t have published it in this way.


#11

They do say each bank has their own procedures and you should do a bit of research first ie contacting the bank.

But yeah, why not pay it off before switching, that’s the easiest


#12

Quoting the article:

What happens depends on each banks’ procedures. Your bank should contact you to agree on a way to pay your overdraft back, or you can get in touch before you switch to find out how it works.

Certainly I find this really steers people toward “sit and wait”. It should’ve said: “You should contact your bank before you start your switch to see what your options are for paying back your overdraft. However, if you are too lazy, you can also wait for them to contact you.” (expressed a bit nicer, obviously).

And as I said before: “contact you to agree on” a way to pay back is borderline misleading. They’ll contact you to demand money by a very near date.

I get that the purpose of these articles is to put prospective customers at ease, and make everything appear easy. But this phrase in particular really upsets me, because it may instil a false sense of ease in people who may not have the funds to pay back their overdraft with only a few days notice.

For a bank that’s supposed to be ethical, pro consumer, etc, this is in my opinion not appropriate, as it can lead to serious issues for those who don’t have the funds to pay back their overdraft right away.

The whole thing should’ve come with big, fat, bold, red notice, that you shouldn’t switch if you are currently in overdraft and don’t either have a new, equivalent overdraft already lined up, or are otherwise able to pay back your overdraft in full right away.


#13

That last paragraph does need adding.


(Peter Shillito) #14

I wasn’t completely sure how much I’d have to pay back because some recent payments weren’t showing on my statement by switch day (contactless+Natwest isn’t a good mix by the way) so I waited until the amount was final before paying back. Plus, I’d be paying more in overdraft fees on Monzo for paying it earlier in the process than just waiting for Natwest to finalise everything.


#15

I agree with this. In fact I would go further and reflecting Monzos ethos of being helpful and responsible I would put a warning (that you have to click to clear) at the start of the CASS process saying “if you switch and have an overdraft it is likely that your bank will require you to repay the full amount in a few days after account closure. Failure to repay this when asked will have an adverse affects on your credit rating and will probably be quickly referred to debt collectors”

I’m really concerned at how hard Monzos is pushing CASS, whilst glossing over the potential severe downsides.

Edit: should have read the original post properly, but yes, switching should come with a clear health warning


(Jamie 🏳️‍🌈) #16

I don’t agree that it’s Monzo’s responsibility to advise on a customer’s borrowing with another provider. The contract is with the other bank and Monzo cannot be party to this contract. The customer should be aware of the terms of their borrowing and deal with that lender accordingly.


#17

I agree with your statement. However, given that Monzo often portrays itself as putting the customer first, being hyper responsible and ethical, and always being their customers’ friends, I’d like to take them by a different standard, than any legal responsibility.

And it certainly seems like the recent push towards (expensive) overdrafts and CASS (to a half ready product) isn’t really in keeping with that image.

I hope the hyperbole is evident in this post


#18

As each bank has different rules yes, but they produced a guide and mentioned overdrafts so to tag on “you may need to pay it back immediately” isn’t a big deal


#19

The customer should be aware but very often they are not. One of Monzos USPs is supposed to be making people aware of financial stuff in a simple, clear, accurate way - see the blog posts on basic financial stuff, the easy to understand overdraft pricing, the focus on making budgeting something that is done for you.

This push of switching is much more like a legacy bank, get the customers hooked at all costs, and any debts that may be agressively chased by their old bank, well, the customer should have known…


(Jamie 🏳️‍🌈) #20

I guess I’m of the opinion that no friendly Hot Coral–coloured Monzo app will ever fully equal people actually taking some real responsibility for their lives.