Interest rates - for Monzo

Monzo Chat
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Now, this might be a stupid thought process, so I’m curious as to what others think on it.

At the moment, the interest rates in all saving pots are dropping month after month, for obvious reasons. My understanding is that Monzo get a cut of the providers rate, and we get the rest.

My question/thought - what is the best approach during this to help Monzo through this? Do Monzo make less money from our money while it’s in saving pots (or maybe more now that the BOE rate is so low)? Is the value so low that this is irrelevant anyway? I might be alone in considering the interest rates on my savings pots to not be worth much, in comparison to potentially be able to help drive extra revenue for Monzo.

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I’ve closed all my pots and moved all the cash to Starling, the interest rates are so low these days that it doesn’t really matter to me anymore how much it is or isn’t earning.

I’ve gone with the not having all my eggs in one basket approach, so keeping my savings totally separate.

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Right now it’s infinitely better to invest your money. The inflation rates, even before coronavirus, it will just shred your savings.

Investing in Asian equities right now. They seem to be ahead on their recovery.

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I’m not sure that it’s the function of the customer to help Monzo, but I’d guess that Monzo are deriving most income from interchange fees. So spend your money on the card, don’t use ATMs, and don’t stray outside the UK.

Actually, if you really want to help their cashflow, transfer some money to an account held elsewhere, withdraw it from an ATM, and deposit it £1 at a time at a PayPoint (I’m assuming that Monzo pay a percentage fee for PayPoint deposits).

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So, I do agree with this in part. However, this is a crazy time. I’ve been supporting small businesses where I can (like takeaways etc) as I’m in a lucky position right now. And in this instance, it’s an action that makes very little difference to me, but perhaps could support in a way

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When Monzo first launched interest paying pots (over a year ago now) they said they receive 0.20% commission from partner banks. With the base rate currently at 0.10% they would get more money if you put your money in an interest paying pot compared to an non-interest paying pot.

That’s assuming the commission is still 0.20%

I don’t think its out of the realm of possibility that commission has been renegotiated since then.

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That’s assuming your goals/needs are long term.

If there’s a chance you might need access to money in the short term its not a sensible choice to invest.

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I had setup an ISA last year and one this year, only to find my rates plummet. I got mails saying i can transfer the ISA, and then a retraction. I cannot even transfer between Monzo ISA’s. So now I am closing all my ISA;s and moving it to another organisation.

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That’s what emergency funds are for.

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People have different goals and aims. I’m probably going to buy a house within the next year. There’s no chance I’m investing that money.

I do have a stocks and shares isa with quite a bit in it and that’s for long term savings.

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That’s probably wise. The Monzo ISA framework is and has been convoluted and in any event has limitations.

You’ve probably missed the boat for half-decent 1-year fixed rates right now, but the short term rates are certainly better than easy access savings which, as you know, are on their arse.

Take a look at the MSE savings list.

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We make a significant amount of money from interchange abroad where the rates are generally significant higher outside the EU than in it. So please go on holiday (when it’s safe to do so etc), relax and enjoy yourselves!

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Related to this - if I purchase items on a credit card and then pay my credit card bill via Monzo debit card payment (so not direct debit or bank transfer) does Monzo earn the same in interchange fees as if I bought the items directly on the Monzo debit card?

My understanding is interchange fees are percentage based rather than fixed amount per transaction, so based on this my assumption is yes - Monzo earn the same in both scenarios.

But would be interested to hear from someone with knowledge on this.

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I make a point of supporting small businesses as well. They tend to be the sort of businesses that have not received repeated rounds of crowdfunding and venture capital investment.

But i I suppose it’s all relative and comes down to how one defines small business. :wink:

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Yes Monzo would get the same either way. It’s around 0.2% per transaction.

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It seems to be a reasonable function for a customer / shareholder though.

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Depends how much more the investor is willing to put in, I suppose.

Back in the last Monzo Plus days there were people who bought Plus to ‘help Monzo,’ and they were sometimes investors, presumably seeking to protect their investment.

If the reason someone is taking a course of action is because it helps the company, rather than because it’s the best thing to do in its own right, I think I’d be wondering if I’d made a wise investment.

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