Come to Monzo HQ to talk about Overdrafts šŸ˜„

Currently in that situation with my existing bank. I think the switch over to Monzo will be a good time to do away with the overdraft and pay it all down.

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Iā€™ve had an authorised overdraft of Ā£2000 with First Direct for about 20 years. I very rarely go into it, and even then itā€™s always less than Ā£100, paid off from my FD savings account as soon as Iā€™m notified by text msg. It helps to improve my credit score, getting me a great deal on my second mortgage back in 2004. It costs me nothing while I remain in credit and very little on the few occasions Iā€™ve gone into it, so for me itā€™s just a useful tool to save money on large loans.

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So Guys and Gals,

Whilst all the Monzo team are focusing on getting the Current Account rolled out.
Hereā€™s the question.
Just how much would you be prepared to pay for your Monzo Overdraft or other services for that matter?
Is their an overdraft pricing model that youā€™d prefer to see?

Hey Justin, Iā€™ve moved your post here, as the teamā€™s asked for some feedback on the overdraft fees & outlined a few options thatā€™re being considered. It would be great to hear your thoughts on how youā€™d like the pricing to work :slight_smile:

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If I had known that there was already a thread, I wouldnā€™t have bothered putting the post up.
Iā€™ve been interested to know what the pricing structure is likely to look like, and has been noticeable by its absence on the forum.

I appreciate its not all going to be free forever, but will the charging structure look attractive enough for a short term cashflow bridge until the next payday :wink:

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Just to be clear, the plan so far is that Monzo wonā€™t charge fees for itā€™s standard services.

The only* things that you will pay fees for are the overdrafts & possibly, expedited delivery for the debit cards but only if you choose to use those services.

*There is also a potential fee for ā€˜investigationsā€™ in the Tā€™s & Cā€™s but thatā€™s charged:

to cover costs of investigating suspicious transactions at customerā€™s request (we may, at our discretion, waive this fee if genuine fraudulent activity)

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Having just spent 12 months knocking a Ā£1000 overdraft on the head, I confess im not eager to have to run that up again any time soon.

The pricing model Santandar had me on is Ā£1 a day. So thats Ā£365 a year,
That works out at about 36% i guess, on the 1K debt.
As you can imagine that became even more painful as I reduced the the overdraft balance as I was still paying Ā£1 a day on an overdraft.

If I had been on a percentage interest then of course iā€™d have been paying next to nothing in fees the final few months of paying it off.

So iā€™m in the No flat fees and interest only camp.

Justin

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I am going to take a unpopular view but you know it is what it is.

I donā€™t think we should pay anything for an overdraft. Why? Simple we wonā€™t be paid (interest) on our credit balances so what is the banks money worth more then anybody elseā€™s money? Itā€™s only fair that if you donā€™t pay us we donā€™t pay you.

Remember the banks earn money from playing with/trading with our money on the money markets during the night so I think thatā€™s compensation enough.

In saying that the less evil of the two if pushed, is paying debit interest as long as itā€™s not anything too crazy noting the above.

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Not unpopular - just a different point of view

why would you want an overdraft if ā€œweā€ have a credit balance :slight_smile:

If you (?) want Monzo to be a facilitator for you (?) to borrow somebody elses money - they are providing a service to enable you (?) to borrow money from me (?) - I am very happy to have Monzo provide a service that is free - to me - and I donā€™t mind them using my (? ) money to lend it to you (?) to help you (?) out - for a price that enables them to run a business that provides my service - Monzo would like some reward to enable them to keep giving me the service that I want without a charge to me, pay their rent , pay their wages and make a profit ( in other words a business :slight_smile: )

  • nowt in life is free - I am willing to accept them lending you (?) my money for the service they provide to me at no charge with no recompense to myself for using my Ā£103.63 as long as there is no restriction from Monzo on me drawing out my Ā£103.63 when I want it - now if I want to tie up my Ā£103.63 for a fixed time maybe I would expect some kick back in interest
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Not an unpopular view but an impractical one. Monzo is a bank not a charity or non-profit organization, it needs to generate income to cover staffing costs, introduction of new products, app development, card issuance and distribition, later international expansion, etc.
Unless you know some fairies or a tree that grows money on, I think Monzoā€™s longstanding plan to cover costs thru overdraft provision is a sensible route to take.
Unlike huge mega banks they do not have other sources of funds or old branches to sell off.
Overdraft interest or charges are a certainty.

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A credit balance does not prevent you from having a overdraft facility so I really donā€™t know where you was going with that. Just remember my money (if I had a savings account) would also be used to lead others money.

So in your case you are happy with them using your money to help fund other people, on a short term basis (though itā€™s normally via savings accounts) which I am not sure Monzo will be offering but I digress.

Yes they do take some risk in offering credit but like I said they make money on our money during the nights, which is all very good. To offer no credit interest on credit balances (please note this is not just a Monzo only problem as almost all banks are doing this a standard now) is a bit cheap.

Hmmmmm reads it again So as you put it there are no such things as money trees fine. So you are happy for them to make money off your money and give you no credit (interest) for it. Surely you would want your money to work as hard for you as it possibly can as money does not grow on trees.

Maybe your views are slightly different then mine as you are an investor.

Look businesses should make money so your quip about Monzo not being a charity was a great soundbite but offered absolutely nothing to the conversation, as we joined Monzo fully knowing that anyway.

Monzo does not have bank branches to sell off but that means they are a low cost operation. Which means they have less overheads. So just like you are arguing it one way I can just as successfully argue it the other.

I have thought of a halfway house. Want a overdraft then forgo credit on your credit balances or have slightly less. If not then you should have credit interest as a matter of course.

When Monzo offer you an overdraft they take a risk (& lose some of that money, due to bad debts), while providing you with a valuable service. So you are paying to cover the losses & use the service - but if you donā€™t want an overdraft, you donā€™t have to take one.

Theyā€™re not earning significant amounts of money in other ways - medium / high return investment, mortgages, business loans etc. which the other banks do.
Since the overdrafts, which are their only significant revenue stream, will only cover their costs, it would be risky / foolish to use them to fund interest payments on deposits.

But users who want to earn interest on their in credit balance will be able to transfer & manage it via Monzoā€™s API & marketplace. So theyā€™ll have easy access to a Moneybox ISA or P2P lending service provider.

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I know banks offer an overdraft subject to internal credit scoring.

Yes and I also know that itā€™s one of the few ways Monzo plans to make a profit.

I also can counter what you are saying, by saying yes they donā€™t have to earn loads of money, like the high street banks.They donā€™t have the high street presence or the staff or the huge insurance bills to insure the above.

So itā€™s really horses for courses.

Am I anti Monzo making money? No of course not. Not offering interest on credit balances is not just a Monzo thing as almost all banks do the same thing.

People are arguing it like itā€™s Monzo one and only revenue stream. Surprise! Itā€™s not. However itā€™s one of the most lucrative depending on what/how they charge but we will see in due course.

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I have a feeling the investors would disagree with you.

But either way, it looks like you might have missed this -

Could you break that down for me? Iā€™d be fascinated to hear your insights on these other revenue streams.

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Lol you want me to explain Mondoā€™s additional revenue streams? Hmmmm whatever way you look at it thatā€™s not good. Iā€™ll be nice and offer you just 1. Keeping the credit interest for themselves. Maybe thatā€™s too simplistic? Iā€™ll try another one. Are they not thinking of charging for faster delivery for lost of stolen cards? If I have to tell you all of the above then like I said above thatā€™s not good, as I thought you would be on top of things like this. I guess not.

Like I said at the end of my last post itā€™s potentially the most lucrative charge.

It costs Monzo about Ā£50 per year to provide you with a current account. The costs come from producing the plastic debit card, posting it out to you, making a card transaction, providing customer support 24/7. Thatā€™s before the salaries of programmers, designers, office rent, etc etc.

If you have an average balance in your account of Ā£2000, Monzo would earn Ā£5 a year from that money by sticking it in the Bank of England (at 0.25% base rate). So unless you have huge amounts of deposits (ie Ā£20k per person) sitting in your current account, we need to find an additional Ā£45 per customer just to break even (not even make any profit).

The average high-street bank earns about Ā£120 per account per year, and about half of that comes from hidden fees and charges. Things like penalty fees for rejecting unpaid direct debits, and unauthorised overdraft fees. We donā€™t have any of those fees.

We could offer interest-free overdrafts, but then costs would need to be covered some other way. Maybe a Ā£5-10 monthly fee. But I suspect most people wouldnā€™t want that.

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Hi Tom, nice to have you on here. How much roughly does a bank earn by playing the money markets in the nights with our money? That might go a little bit to reduce that Ā£45.00 I guess?

Not many people know about the market markets as itā€™s not so much a secret but itā€™s on a need to know basis.

Banks need to post and produce debit cards once for what every 2 years on average. (lost and stolen cards) as they are normally valid for 4 years or there abouts.

Iā€™m not an investor :slight_smile: but I do know enough about Monzo to know that they wonā€™t be investing in the ā€˜money marketsā€™ - see the link in my first post in this thread.

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Iā€™ve amended the above. :slight_smile: