This is my concern here. I think if they were to use your total balance in your account and non interest bearing pots that would be the ideal.
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I agree. If it’s in the same account, albeit ringfenced in a pot, it should be treated as one balance. That’s what I like about Starling’s implementation. Not only does it apply to credit interest but also to overdraft calculations too.
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All I am sayings is you can’t have it both ways. You can’t have it “ring-fenced” from an active balance (and if you have an overdraft your ability to go overdrawn) and then earn interest on it.
If it was used in both ways as @danmullen describes with Starling - that would be different as it wouldn’t be “truly” ringfenced. But as it operates right now that money that is in that pot, may as well be in another bank account, in which case you wouldn’t earn the interest on it.
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With Starling it is ringfenced - you can’t accidentally spend money from a Goal. You would need to move it to your main balance in order to spend from it. However, Starling take your overall balance into account when calculating interest and they factor Goals in when calculating overdraft fees, i.e. until your total balance drops below zero, you aren’t charged for being overdrawn.
That’s a much fairer way of doing it IMHO. If the money was in a completely separate account then I’d say it’s fair enough to treat it differently. But with basic Monzo Pots, it isn’t in a separate account.
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Apologies, I’m not talking about spending from a pot.
If a pot can be used to calculate whether you are overdrawn, it is only fair to then use that pot’s value to calculate interest. You are applying the same treatment across the board.
However, for Monzo, the overdraft doesn’t care whether you have £100,000 in a pot - you’re still overdrawn in your “active” balance and therefore you need to take some of the money in a pot out. Therefore the same treatment would be to not calculate interest with reference to a pot.
It isn’t a separate account, but it is treated as separate funds - which is why a lot of people use the pots, to separate out their money and move them into the “active balance” when the bill is about to go out.
I agree I think I prefer the way Starling do it (although it may become confusing with savings pots). But I don’t think the way Monzo do it is unfair as it is the same treatment across the pots.
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I think Starling’s approach is much better in this instance. With goals being included in the main account balance.
If Monzo don’t include pots into the interest earning balance they’d be discouraging the use of pots and thus saving
Overdrafts should work the same way. As long as I maintain an overall positive balance with the bank I shouldn’t have to pay anything. The bank has my money, after all, il not using theirs.
Now partner pots are different. That money isn’t with Monzo and as such it shouldn’t count towards interest/overdraft fees.
Monzo’s idea of being a financial hub starts to get in the way of offering a sensible current account and starts to interfere with existing features IMO
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For anyone who is unfamiliar with Starling’s implementation, think of it this way. You have £500 in your main balance. You earn interest on £500.
You then move £250 into a Goal (Pot). You continue to earn interest on the full £500.
You then spend £300 from your main balance, leaving you £50 overdrawn. Your overall account balance, including Goals, is still £200 in credit, therefore you don’t have any overdraft charges and earn interest on £200.
To me, that’s the fairest way of doing it.
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As a non-starling user, this is a genuine question - do Starling offer variable rates of interest on a goal pot?
If no - then it makes sense to treat all pots as being part of an “active” balance.
If yes - this is something Monzo could definitely take into account. Although I can see the arguments for treating a pot as completely separate.
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No, it’s a single rate of interest applied across the board. Well, I say “single”… the rate is 0.5% up to £2,000 then 0.25% above that up to £85,000.
Monzo don’t offer any interest on pot balances. It’s a third party, your money isn’t with Monzo anymore
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I suppose the argument there then is that it is still all technically within your over-arching “active” account it is just “divided” into little sub-sections.
Whereas someone could have any number of set-ups with ISA/ Easy-access/ Locked/ Un-locked pot which makes working out what is in your “active” account slightly more difficult.
Exactly so where do you draw the line? The non-interest bearing pot is entirely opt-in and for the most part is to “siphon” money for specific goals or to ringfence bill money until bill date - so by “forgetting” that that money exists, you are able to work out how much money you “actually” have to spend. Whereas if that is allowed to be incorporated in your overdraft and interest calculations it doesn’t feel ringfenced to me.
I was hoping that would happen to me, but nope. 🤦
But it is ringfenced. Using Monzo’s own definition of “interest” in their recent simplified English blog post, why shouldn’t they pay interest on money you have deposited into a Pot? And why should they charge you for being overdrawn when you have money deposited with them, albeit it in a Pot?
I do agree that since the introduction of third party Pots with different rules and rates of interest, it does muddy the waters. I still think it would be trivial for them to include basic Monzo Pots in the credit and debit interest calculations.
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Oh course I realise it is actually ringfenced and until I move it into my active balance I can’t spend it - but that is for most the core benefit of a non-interesting bearing pots that it is siphoned off and “inaccessible” so to know that my overdraft and interest are affected makes it feel like it isn’t - which for some might be crucial - but I agree I would prefer the way starling operate as it seems “fairer” to all involved.
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I think Monzo is at a stage where their offering starts to clash with their goals and it will make no sense at all.
If they want to be a financial hub, working through partnerships and offer their own current account, it should work as such:
Monzo have their own current account with pots - money in standard Monzo pots is still with Monzo - as such, it should count towards my overall balance. If my running balance goes below zero, but I still have money in a pot I have an overall positive balance with Monzo and I am not using their money. As such, money in Monzo pots should count towards interest and overdraft fees, a la Starling.
When it comes to partners, the money is not with Monzo, and as such that money shouldn’t count towards my overall account balance. If my main balance goes below 0 and I have £10000 with OakNorth, I am using Monzo’s money as my 10k is with someone else. In this case, I should be charged for my overdraft.
It makes the most sense. Monzo should consider my overall balance with them and should not be afraid to compete with partners. This is why I do not think their current stance makes sense. Be a financial hub or be a bank, don’t weaken one to please the other
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I do agree here and think you lay out perfectly how it should operate - I am in a way playing devils advocate as to if it were to continue to play out now (not factoring into overdraft and therefore not factoring into interest).
It is for me, the only problem is that a majority of people use a pot to siphon money away for exactly when it is need (committed spend) and so therefore for that to affect whether they are actually overdrawn may be more of a hindrance than a benefit - they want to know what they are on exactly at that point (having disregarded committed spend) - if that makes any sense?
Yes, it makes sense - the way it currently is, with pots not factoring into overdrafts it makes sense for them not to count towards interest.
But with the introduction of an interest on the main running balance, they might discourage people from saving in pots and from using one of their main headline features… quite a backwards way of thinking if you ask me.
I’m just hoping that between the FCA cracking down on fixed overdraft fees and the introduction of an interest Monzo will review how pots work - although I might be naive.
As I said in another thread, Monzo have got quite confused with where they are and where they are going.
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Getting some lovely tweets on Social today, which is making us all very happy! 
Making me feel all warm and fuzzy! 
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This may be a rather cynical view - but it may be encouraging the use of the savings pots (and therefore a way for Monzo to get the sweet sweet % via the partnership agreement.
But I do think Monzo need to have a “review” of their overall goals, once the revenue stream push has died and it’s possible to reflect
Which was my reasoning for going with the 2.5% for balances under £1k.
It seems counterintuitive to offer interest on larger balances as it would disincentivise using pots. Though I’m making an assumption that few people leave 4k in their main balance.
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