I totally agree with most of this feedback! (Gosh, this received more replies than I expected!)
I think it would be very difficult to get students and young people to accept overdrafts with strings attached, but there really has to be a way to add incentives for them to manage their money responsibly.
I like the small idea that @Jim1701 had about the slow decrease in overdraft limits, which could help set people back on track if they do badly! I feel like there has to be some way to push people in the right direction, though. Perhaps there could be some way to apply gamification to good habits in a similar way that Monzo does for referrals.
I feel really passionate about getting young people on board, though. I totally agree with you, @jamiedjohnson94! Monzo is the kind of thing that younger people could make explode in popularity. For example, look at Discord! I have so many friends who have stopped using Skype completely and have switched to Discord, simply because they provide a more polished service and have a meme-loving team backing it and providing awesome support. (Discord’s Twitter comes to mind: https://twitter.com/discordapp)
I hold the strong opinion that if Discord can grow to 87 million users [source] in a few years and start to replace Skype, not even by providing more features other than a new look - they didn’t have video calling or screen sharing for over a year, which Skype definitely did - that Monzo could replace the old, traditional-style of bank that is literally stereotyped to be bad because so many people dislike them. (Gringott’s bank and all the money-hoarding goblins from Harry Potter, comes to mind when I think about banks. )
If Monzo was able to partner with just a couple universities and a cool offer, I bet it’d spread like a wildfire.
Anyways, I’d like to say thank you for the awesome replies and support so far! I was a little nervous about making the post, but I just had a rant flowing and I had to share it. Y’all are awesome!
Well, I think it’s an important topic and one that’s been talked about. I definitely agree with opening the Monzo account to teens. Generally I’m opposed to any age restrictions that don’t need to exist (especially ones for marketing purposes, like Vodafone’s new VOXI plans that are limited to 26 and under and are way cheaper; though those also have massive net neutrality violations… they’re so cheap!). And age restrictions on voting, at the least I’d drop that to 16… but that’s me.
This would work well for more than just teens I think it’s a great idea!
glad you did, please continue to join in! Welcome!
Old thread, but stumbled here after I planned to make a post on student loans but thought I’d do a search first. Thought I’d throw in my 2 cents.
As a student, Monzo’s budgeting and money tracking are holding such promise. I could not be more excited for the spending redesign that’s in the works, I think it’s going to help me ten-fold!
But I love simplicity, and as such I’m dying to close down my legacy bank. I’ve transferred all bills and loans to Monzo, and I never use my legacy card.
The only reason my legacy account is still open is to feed that interest-free overdraft into my Monzo when there are payments I must meet. For the most part I do a good job of keeping that balance on £0.00.
My overdraft is small, but incredibly useful given my “income” (most disgusting loan) comes only at the start of each term. There are times toward the end of term where I have to dip into it. E.g. where I pay the house electricity bill, and have to wait a day or two for my housemates to pay back their share.
I know you want an incentive for students to not use overdrafts, so perhaps offering smaller ones e.g. £500, which if you go further than 500 in debt then has fees attached, could work. And winning all the student favour with this offering will mean more people will see Monzo university and in turn get a little smarter with their money
Why should students get interest free loans, why not apprentices, those on national minimum wage, nurses, etc!? There are many good cases where people have little income and would appreciate free credit, but to pick only one of those groups and exclude the others is unfair. Someone on minimum wage may be struggling to keep their roof over their head and feed their family, and I think they are as equally deserving of consideration as a student.
But banks don’t give interest free loans because students are deserving, they give them in the hope that they are potentially a higher earner and will stay with the bank, making them profit in the long term.
This is the class of people I think Monzo should try to target. People being screwed over by traditional banks. People for whom Monzo’s budgeting features will be really useful. People who might remember that Monzo got them out of their financial muddle and will trust Monzo for years to come.
The market for student bank accounts is fiercely competitive and relies on students not switching away to a better deal in the future. I don’t think Monzo should become involved in this “game” - in fact, one of the things I think Monzo should do is make sure it’s easy to switch away if you find a better deal. Monzo should ensure that their product is an excellent deal for the majority of people, but inevitably there will be some people who don’t “fit” (e.g. people who withdraw lots of cash abroad).
Sometimes overdrafts are the only way some students can live, period (for lack of a better phrase). I relied on my overdraft during my first year as my loan didn’t cover my rent.
It’s not just for free money, some actually really need it and rely on it and wouldn’t be able to go to uni without it.
Right but interest free overdrafts are an incentive to students to go to university, to better themselves and get a higher paying job (that’s the plan anyway).
If lower paid workers were given the same privileges, there would be very little incentive to get a higher paying job or to leave a lower paid job etc.
This is probably going to be controversial, here, but how was Jim being screwed over? He knew he had to repay that loan. He knew it was a student facility, so should’ve expected to loose it when he stopped being a student.
My post wasn’t intended to discriminate, and you’re right there are other groups who would appreciate it. I was just addressing an incentive that, from my experience, for _ almost every_ student each year is the deciding factor on whether to stay with their current bank or shift.
Everyone pre-uni has a bank account, and most simply ask their current bank for their interest free overdraft. If the bank didn’t offer it, they’d switch banks. The student market is a huge one with fresh faces every year, and if approached right will produce lifetime Monzonauts, which in turn means bigger and better Monzo and subsequently better deals for all
But interest free overdrafts like this also introduce a massive burn rate. I’m stunned by the amount of overdrafts students are offered in this country. Let alone interest free. No such thing where I’m from, so maybe that’s why I look at it differently.
But you can only possibly loan out thousands of pounds interest free to potentially 100s of 1000s of customers, if you have loads of cash. At the moment Monzo is trying to break even. Having such a massive loss leader is probably a massive no-no until they are able to make profits elsewhere.
This is a fair point, just had a fun little gander and in 2015 total students in higher education topped 500,000. So that would be a lot of spare cash that Monzo would have to have lying around. Agreed that perhaps there are better places Monzo could use the money as it grows.
That’s the myth of higher education these days. The graduate premium has been eroded over the last few years - when everyone has a degree, a degree becomes less valuable. (With notable exceptions).
I think that for a bank to give a student a large overdraft and then take it away immediately after graduation (or immediately at some point soon after graduating) is irresponsible of the lender. Was Jim also behaving irresponsibly by not paying down his overdraft? Of course. But ultimately I think banks have a (limited) duty of care towards their customers, and that duty surpasses their duty to return profits to their shareholders.
I obviously don’t know what paperwork Jim signed when he first signed up for the overdraft, so take this comment with that in mind. But I honestly don’t think I agree with you: I’m working under the assumption that Jim was told when he signed up, that the interest free overdraft was only available while he was a student. If the customer now ignores that, and just keeps overspending, despite knowing that this deal is coming to an end, then I don’t see how the bank has a responsibility for this.
I’m not sure if “I told you buried in the small print between 3 and 8 years ago” is fair. I’m not disputing the legality of the bank’s actions, but the ethics.
A combination of warning the customer nearer the time (e.g. by email 6 months, 3 months, and 1 month before interest will be charged) along with tapered overdraft reductions (e.g. from £1,500 to £1,000 to £500 to £0 over time) seems a fairer way of achieving the same outcome.
that is a myth. Historically older generations would remain loyal to a brand from first job to last, but newer generations are more fickle. Giving them an interest free overdraft will not make them a customer for life. Another bank just has to offer a £250 or £500 switching incentive and a large number of people now jump at the chance loyalty has gone out the window. Particularly as legacy banks make the effort to spruce up apps and add functionality, such as instant notifications, customers will see less reason to stay loyal. The fact the technical infrastructure behind the scenes is better, or the firm has a great ethos or whatever does not factor in for most people.
I’m not saying that the bank couldn’t have handled this nicer and kinder! They certainly could have. But ethics aren’t black and white, and there is a wide sliding scale between “nice and kind” and “screwing someone over”. And it’s the latter phrase that I objected to in this context.
Obviously if this was hidden in the fine print, then we’d again be someone nearer the black end of the scale. However, as I understood it, we are talking about a student account. By the nature of it being a student account the customer should’ve expected the facilities to be withdrawn once they are no longer a student. Regardless of fine print. Which makes this a significantly lighter shade of grey of me. And withdrawing student account facilities when one is no longer a student certainly doesn’t amount to screwing someone over for me: It’s fully expected. (Although, again - just to make sure I’m not misunderstood -, the way in which this was apparently done could be improved.)
In my opinion we all need to take some responsibility for our own actions (or inactions), and not always seek to make others responsible for them.
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I think it’s a great idea!
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