- Banning fixed fees for borrowing through an overdraft - calling an end to fixed daily or monthly charges, and fees for having an overdraft facility
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I never agreed with Monzoās 50p thing. IIRC their early team did some āresearchā years ago with a handful of users and came up with the idea that everyone loves massive fixed fees rather than prudent APRs because this standard practise is confusing to regular people.
Glad this ruling has been made and now all these dodgy charging practises will hopefully end.
Monzo is on the name and shame list but the worst has to be Lloyds charging around 60% APR to people in agreed overdrafts. The worst thing about them was that they had a reasonable APR before suddenly switching to the āper dayā ripoff amount, trapping and locking in hundreds of thousands of customers. How the FCA/FSA//PRA etc let them go about it I have no idea. Absolutely criminal rates.
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I think Iāve done my calculations rightā¦
If youāre Ā£20.01 overdrawn, the APR with Monzo is around 900%
Whilst thereās an argument 50p a day is easier to understand, it is a rip off for those with a smaller overdraft.
Itās a good move for the FSA to make banks all advertise overdrafts by APR so customers can properly compare overdrafts (thatās my understanding of whatās about to happen - please correct me if Iām wrong!)
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Who is consistently overdrawn by 1p though? I disagree with Monzoās charging but letās be realistic 
Monzo is poor but there is much worse out there. Monzo is loss making but there are banks out there milking the poor like they were farm animals.
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As long as Monzo keep displaying the running total at the top of the feed of that months charges it will solve the problem with the APR not being easy to work out.
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This x1000! 
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About time the overdraft fees were made fair.
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Theyāll have to make the money elsewhere and I wonder what that will mean? Fees for current accounts might rear itās head again. R-
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I canāt see any bank charging for a current account, nevermind Monzo. O-
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Hopefully. R-
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There would be a lot of backlash thatās for sure 
. I for one have never paid for a standard current account. O-
This is a good illustration of what I donāt like about the 50p charge though. Itās regressive, and targets those with least with what to them are very high charges. It doesnāt help people get out of persistent debt, it penalises them.
It also leads to absurdities like the above situation, where Monzo can lose money to people gaming the disparity between their percentage based interest rates, and their flat fee overdraft, which rewards people who borrow the maximum.
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There was a somewhat valid reason for the āX per dayā charging structure - whilst predatory to those most likely to be in their overdraft only by small amounts every month or so, it was easier to understand the consequences of doing so - albeit a huge % of what youāre actually borrowing.
The guidance seems to tackle both issues - the understanding and the predatory prices (especially for unarranged). Whilst being smacked in the face with an APR%, there will be a calculator that will tell you what that means in cold hard cash and I believe there will be a way to āshop aroundā for the best overdraft deal.
It must however sting the throats of all banks (whether they were already APR% or per day models) as there is effectively no reason to have āarrangedā overdrafts anymore - if there can only be one interest figure used. This is the only thing I donāt agree with as it begins to blur the lines between responsible and irresponsible lending.
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This is very relatable. When I go into my overdraft (more than Ā£20), Iām just like āwell, now Iām paying the same amount per day, I might as well buy the things I was holding back on until after pay day cos it wonāt cost me any moreā.
That being said, I recently reduced my overdraft with Monzo with the intention of using a different bank accountās overdraft to cover for it if I fall into it again, and since that will cost more the more I use it, the less likely Iām to spend even more.
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I think the really interesting question is the impact of this to Monzoās business model.
Monzo - at some point - has to make money like every other bank. I understood that overdraft fees were going to be a primary source of income to help achieve this, but I could be wrong?
Given how generous Monzo is regarding transfer fees/withdrawal fees/FX rates itās quite hard to see where the income is actually going to come fromā¦
Compared with other challenger banks, Iād argue that Monzo are the opposite of āgenerousā when it comes to feesā¦
But regarding their other income sources, Iām guessing the āfinancial hub/3rd party integrationā is still going to play a major role here.
Taking a cut from customers who donāt want to shop around is easy money, and everyone feels like theyāve got a good deal.
Not to mention Monzo Plus, which looks to be a very high margin product for them right now.
This was always on the cards, and despite the argument of 50p or APRā¦ It should result in many more people paying less money to the banks, which is a good thing.
I agree. It would just take 1 bank to refuse to do it and they will get market share very quickly. Its an all or nothing type of thing.
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Have Monzo commented on this previously?
I imagine they will stop being so stupidly hesitant on their other lending products. The fact that I still canāt be offered a small loan when Iāve had all my financial transactions going through Monzo since current account beta days is frankly laughable.
Not to mention, minuscule overdrafts relative to what other banks offer.
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Banks make money from their Mortgage book, I havenāt seen any evidence to suggest Monzo are looking at Mortgage lending. The margins on current accounts and fx transfer are tiny in comparison.
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