Come to Monzo HQ to talk about Overdrafts 😄

(Brexit Day Is Gonna Be Shamayzing.) #89

I used to get charged by Lloyds when payments got declined so I guessed most other banks charge?

(Alex Sherwood) #90

I see. So since Tom was just on Newsnight (at 1:32 in the embedded video), explaining how ridiculous it was that banks are charging users for rejecting Direct Debits, I’d hope that Monzo isn’t planning to charge any fees in that scenario or if they decline a payment.

But it would be great if the team could confirm that…

(Jonathon) #91

It can depend on the account. Lloyds do have accounts where there is no charge.

(Brexit Day Is Gonna Be Shamayzing.) #92

I’ve not been with Lloyds for years now but I always got charged and it used to push me in to so much additional debt.

(Jonathon) #93

I can’t recall what I had with them. They have a Control Current Account for £10 p/month that doesn’t charge, and anything under £10 returned isn’t charged either (

I have never been charged by Natwest so far, but I can’t see why I haven’t. They specifically send me a text to say I won’t be charged.

Either way - I hope Monzo doesn’t do this. It sucks for the consumer because no doubt you’ll be hit with a charge from whatever company the payment is due to, AND then hit by a bank charge. I don’t see any reason why it costs the bank money.

(Luba Chudnovets) #94

We definitely will not be charging any fees for declining payments or direct debits :+1: If you do not want to take out an overdraft - this is totally fine, we will just bounce the payments free of charge.

Announcing the Overdrafts Preview!
Monzo banking charges
Direct Debit Reminder
Mobile Top Up
The Monzo Current Account Preview
Designing a product with mental health issues in mind
What We Know About the Current Accounts & Debit Cards / FAQ :bank: :credit_card: (open Wiki)
Please keep the prepaid cards
(Leon) #95

Even that’s not true, as just because you apply for an overdraft does not mean you will be accepted for one. Even then it might be less (more common) or more (less common) then what you asked for in the first place.

( related to Monzo CEO, Investor in Monzo ) #96

Richard - "if you don’t apply for an overdraft you won’t have one, they are not compulsory "

Leon replies - “Even that’s not true, as just because you apply for an overdraft does not mean you will be accepted for one. Even then it might be less (more common) or more (less common) then what you asked for in the first place.”

  • why are you getting so pedantic on this Leon ? :slight_smile:

(Leon) #97

You’re right I am, maybe a little too much so. :scream:

(Patrick) #98

Technically Richard’s statement is 100% true. He was relating no information about size of overdrafts, future applicants’ success rate or anything else.

If you don’t apply for one, you will not have one. Simples!!

(Leon) #99

You’re right I did misread what was said now, after looking back my above post is redundant. I’ll keep it there however.

(Luba Chudnovets) #100

Dear Monzonauts, thank you so much for your feedback and such an interesting discussion! :+1:

If you are keen to learn more about what our overdraft product, you have an opportunity to take part in our user testing, which will take place during lunch time (12-1pm) on Thursday next week (May 4th) and the week after (May 11th). We will provide lunch! :burrito: Please send me a message if you are interested! :blue_heart:

(Alex Sherwood) #101

Naji’s just confirmed how much the buffer will be :thumbsup:

Will overdraft be on cleared balance only?

I was invited in for user testing last week. Overdrafts offered to those eligible as they begin to run out of funds via a realtime notification. Proposal is that overdrafts of up to £1,000 max will be available to start with (subject to a credit check), the first £20 would be free, thereafter the cost would be 50p per day regardless of amount ie any amount between £20.01 or £1,000.

No mention of interest rate / EAR etc for comparison purposes in the UX I saw (perhaps this is possible given there is no interest being charged, only fees, but I thought it was a regulatory requirement regardless).

Going to be a divisive product in my mind, on the basis that (1) if you need to borrrow £25 you might as well borrow £1,000 because it will cost you the same each day (which is encouraging people into greater debt) and (2) 50p per day for relatively small amounts is more expensive than payday lending (which is legally capped at 0.8% a day) - and this for an authorised bank overdraft.

Somewhat at odds with previous comments from @paul when he wrote a blog on this subject, who was talking about unauthorised overdraft:

Over the past few years many banks seem to have concluded that their customers don’t understand percentages, and so they charge 50p or £1 per day for going overdrawn. You do the maths! I reckon that’s more like 200-400% in terms of interest. And I thought payday lending was supposed to be expensive…

Personally I think it’s disappointing for Monzo to take a lowest common denominator approach on this, perpeptuating the injustice of UK current accounts: those that struggle in the red will be subsidising free accounts for those In the black to a disproportionate degree.

Overdraft position

In the demo I saw last week, yes. You don’t have to take an overdraft, so new payments would be blocked if you don’t have an overdraft.

(Alex Sherwood) #104

I did too & didn’t see it in the preview I saw. Perhaps this is still being worked on or displayed on another screen.

As Naji noted in the minutes for Monzo’s brunch, they haven’t decided which approach to take yet.

If I recall correctly, a fixed cost per day works out cheaper than a tiered fee, that increases as you borrow more.
Either way, it’s my preferred option because I know exactly what I’ll pay at the end of the month if I borrow & don’t have to worry about my spending (especially delayed payments) bumping me into the next, more expensive tier.
But obviously this is subjective & there will be lots of different opionions on this.

I’d wait until Monzo reveal more details before worrying about this too much.

I’m not sure how you came to this conclusion? It looks likely that Monzo will offer loans for large one-off purchases as well, which presumably most users will want & that will earn them revenue too.

Monzo won’t charge punitive fees which do disproportionately impact the less well off & that alone will reduce the revenue they make from the current accounts by about 50%.

Obviously the interest rates will have to be competitive, otherwise users won’t use the product & 7/10 people use an overdraft of £700 each month anyway so it’s not just minority of users subsidising the rest. And they’re only expecting to break even from the overdrafts so they’re obviously not being greedy here.

Lastly, no one will have to take out an overdraft if they don’t want to…

How would you address the perception that loans are unfairly subsiding other’s accounts - given the fact that Monzo needs to provide this product in order to earn revenue?

(Dom B) #105

Despite all the discussions here, I haven’t seen one part of transparency come up. I’m an overdraft user and I pay £6 a month to Lloyds for using it, plus a %age interest. My main qualm is not knowing how much it will be when the charges come.
For me, just being able to see current and predicted total fees is the most beneficial thing. If I was overdrawn for 15 days at £600, you can predict a total cost, especially when a regular income is coming in.

Personally I’d rather a percentage. But why not an option? Pay for an account and have one type of charges, don’t and have another?

(Gareth) #106

Hopefully it will be easy to see current charges; and if they go for flat fee then 15 days would be £7.50 (at 50p per day)

Take a look at this if you haven’t already:

(Leon) #107

I hope that they don’t have the 50 pence a day fee. If £20.01 is borrowed and stays in overdraft with that same balance for a month. It will cost £15.00 which is 3/4 of the overdraft balance. Shakes head

There is nothing stopping you from maxing out your overdraft as it’s 50 pence per day regardless of if the debit balance is £20.01 or £500.00.

I am not going to even get started on the huge buffer they are planning to offer. I would prefer Monzo to keep that token offering and charge debit interest on overdraft balances and call it a day.

The 50 pence per day charge does it cover debit interest or will that have to be paid for separately?

Another thing is for some people it will save them money but for most it will cost them dearly.

For the person that uses their overdraft for maybe 3 days a month it might save them money. (Only if their usage is really small and for a really short period of time otherwise it’s a terrible deal. It’s a lot better to stick to debit interest.)

*Nothing is finalised so there might not be a 50 pence per day charge. I am just offering my opinion to why that is a terrible idea.

(Luba Chudnovets) closed #108

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