Of course this is very sensible and good advice - but is this actually regulated / enforced, or is it a kind of self regulation thing?
(I’m not trying to find loopholes, but you will know better than I that there are products that do just that which seem a bit iffy. But then you’ve got, e.g. 0% transfers which are effectively the same thing, and debt consolidation services, which can be good or bad…)
I should stress that I think it’s good that Monzo is helping folk avoid a debt trap! I’m more curious about how the industry works!
Around this specific point - I don’t think there’s any specific regulation that says what you can/ can’t do but there’s obviously lots of regulation around treating customers fairly, etc.
In practice it’s probably a bit of both - As mentioned above - staying true to regulation isn’t just about adhering to a list of rules - Monzo has regular catch ups with our regulators where we get challenge decisions we’re making and whether we’ve thought about X and Y.
You often need to be more conservative to start with as well - until you’ve built out a good understanding (using data, research or other means) of what “the best thing for customers” actually looks like. For example, for some customers paying off debt with debt may be a good thing (eg. debt consolidation), for others it’ll be a sign of a “debt trap”. The easiest thing to start with is to not allow paying off debt with Flex to prevent the “debt trap” customers - but is there an in between which works for both customer groups. One to explore in the future.
I wonder if the thinking here (in part, at least) includes wanting to avoid any shit storms like there were when the media decided that “Monzo are encouraging customers to go into debt to buy their shares!”, when all it was was that Monzo didn’t say that you couldn’t use your overdraft to do so.
With crypto and investments, because there’s a risk of investments falling as well as rising, it could be the reason is to avoid customers getting caught in a negative cycle. Easy to think “X is going to soar! I shall invest, flex it, and then sell my investment for a profit to pay off the Flexing and be quids in”.
If the investment doesn’t soar, how to pay it off? Would everyone be able to cover it from other funds? Or would they be forced to sell at a loss in order to cover the immediate payment (and risking missing the later instalments)? Safer to rule out risks.
At the very least, this one sentence I think explains all, to some degree or other:
I don’t really understand the logic of how remaining payments are updated if i pay off extra, I just paid random amounts off my two flex payments in order to to round them to a whole number, one for example now has £20 left to pay over the next 2 instalments, to me it would surely make sense that then is split £10 and £10 but it’s not, it’s split £11 and £9, it makes 0 sense at all, what’s worse is I changed the instalment period back to 1 instalment hoping I could then change it back to two to see if it solves the problem, a) it doesn’t solve it, b) I no longer am entitled to the full interest free period.
I have this issue for both flexed transactions but for differing amounts, I’ve seen people give Tymit a lot of flack in that thread but from my experience with them(i’ve used my Tymit card a lot) it seems to work a lot better currently.
I did exactly this last week expecting the same outcome as you, except my remaining payments were a couple of hundred. I’ve got to pay it all next month now
To give this a bit of extra context, the total amount due was £369.
First installment was 17th September
Second was 1st November
Third was 1st December
Since there were no payments due in October, I paid £82 extra expecting the final two payments to balance out to £82 each. They didn’t.
I then tried to reset it by changing the period and then changing it back, but it wouldn’t let me and now I’m due to pay £164 on the 1st November.
This is perfectly fine for me financially, it’s not going to throw me into any hardship etc. but if I needed the money I’d be pretty annoyed.
It’s because ad hoc payments come off of the end of the schedule - ie. you’ll have fewer repayment to make rather than ever repayment being lower.
hmmm - i think you should be able to change back to 2 instalments still and keep your interest free option - I’ll raise this internally.
Remember you’re comparing a product that just launched to a product that has been around for 4+ years. This feedback is really valuable though - we’re definitely looking to make lots of improvements over the next few months (and years). This is one of the reasons we haven’t launched the product fully yet!
It’s also why we biased towards inviting highly engaged Monzo customers as our first set of customers - because they’re really good at giving us this kind of feedback early
This is one of the reasons we haven’t launched the product fully yet!
