Idea- offer interest free student bank overdrafts competing with traditional banks with the perk being the superior budgeting app functionality. As a student I find that is of similar value to say a coach card or other freebie from a traditional bank as it’ll save me at least that much. Then in the long term when said students graduate their accounts mature into the regular account and monzo increases both their customer base (short term) and income from overdrafts.
Currently and even with current accounts there is no reason for students to use monzo except for topping it up from their main interest free overdraft student bank accounts… If monzo manages to attract and keep students they could be set for the future as students will only use one bank account, the monzo one!
When it comes to living on a budget, (as many students are) Monzo has proved a pretty popular tool for managing money day to day (for those that know about us.) We’ve worked on a few projects to get more students onboard to and I think we need to work hard to communicate the relevance and value to them specifically.
Whilst the overdraft will be a very helpful extension of the service we offer, I’m not sure we should push this as an incentive for students specifically, especially whilst we’re still finding our feet with lending.
Just wanted to add to this topic. I’d like it if Monzo don’t do overdraft reductions out of the blue. I recently had my current bank reduce my overdraft by £560 with a notice of 2 weeks. I’ve heard of far worse than this, in some cases £1000. The bank must know that in a lot of cases people cannot afford such a big lump sum with such short notice.
They will give you an option of setting up a payment plan to reduce it down to a certain amount but this is reported against your credit score. The process is a rather long coversation over the phone where they go over all of your monthly bills and expenditure.
Worse still is your overdraft will get removed entirely if you go a penny over the overdraft limit.
Yes, that is a really clear and obvious way of doing it. It will make customers aware exactly how much they are being charged and can make an informed decision based on that that. It will also not create negative feelings, which is most important for a bank like Monzo. A cumulative fee counter and fee breakdown page maybe useful.
A days grace period for small overdrafts would be a good idea. As it prevents people not using the card when they forget to top up and not have to worry about being charged with fees for emergency or accidental use. Even if the fees are small, it will cause annoyance.
A good example recently was when someone charged my card, the activation lapsed and a week later they eventually took the money… It could have easily thrown me into overdraft.
This is similar to when card companies reduce your limit and then write to you to say it had been done and demanding you reduce the balance in a few weeks.
I feel any.change in overdraft limits or card limits should require sufficient advance notice to prewarn customers and give them time to adjust
I’d prefer it if the bank’s default method was to reduce it gradually based on a fair amount they think you can afford. Then give the choice of paying it off in a lump sum or adjust the monthly amount.
Are we sure we’re not misunderstanding Tom’s comment?
I see it more as being able to enable/disable the overdraft on your account (easily through settings) as opposed to checking with you each time you’re about to go overdrawn.
It’s been discussed before that Monzo can only really accept or decline transactions, they can’t say halt it whilst you confirm using your phone and I see having your first payment that would push you into your overdraft declined every time would get very annoying so I see Tom’s comment as being the former.
I agree with what @AdamSee said. A day’s grace (and up to a certain amount) to clear your overdraft before incurring charges is a good idea (and I’m pretty certain a lot of banks do it already).
I didn’t mention that Monzo would do this, instead they’ll simply decline the transaction. As you say, they definitely won’t do this -
I don’t think this -
will be a major issue, as the user will be getting their salary paid into their current account.
Lloyds give me until 4pm on the same day to clear my overdraft but when I’ve not had the money to clear it, I’ve remained overdrawn & incurred their charges as a result. Granted Monzo’s charges won’t be punitive but I’d still rather just have the transaction declined.
My understanding is that Monzo will have offered users, who are eligible for an overdraft, an overdraft a few days before their balance is due to hit zero anyway so you’ll have the option to take one in order to manage this scenario or if you can’t afford it, have the payment bounce…
Surely if you don’t want an overdraft you’ll just turn it off from settings? And then when you want one you’ll turn it on and you’ll go into it automatically (but with a notification to let you know)?
How is having your overdraft disabled (and getting the transaction declined) and then having to enable it any different to having an overdraft but it being automatically disabled until you agree to it each time? The latter is just a more annoying version of the former. Toggling your overdraft on/off wouldn’t do a credit check, etc., you’d be approved in advance and yeah, you could be told to enable in when your balance gets low (if it isn’t) but I don’t see why you’d want to have your overdraft enabled and have your transaction declined.
I don’t get the relevance of people getting their salary paid into the current account? Either a good number of people are going to use their overdrafts fairly regularly or Monzo isn’t going to be commercially sustainable?
Again I didn’t say how the overdraft functionality would be managed, I simply said that if you don’t have an overdraft, your transactions will be declined
Not at all. It’s common practise to transfer small amounts of money from savings to cover your overdraft. Lots of people bob in and out of their overdrafts for the weeks running up to payday.
I’m assuming ghost charges that throw you into overdraft will not incur overdraft fees. Can we have this confirmed?
By ghost charges I mean the ones that are not submitted in presentment file and should have therefore wouldn’t have been included in the spend on other credit card, had only been auth checks, the ones that eventually get refunded back into Monzo account.
Here’s some more details on Monzo’s plans for lending product(s) from the annual report that came out today -
On the revenue side, we will start experimenting with lending functionality. Roughly speaking, we aim to be in the cheapest quarter of the market on price (adjusted for factors like risk, customer profile, and the type of lending), but we do not aim to be price leaders in all circumstances. Nor do we wish to set a single headline price and compete as part of "best-buy” tables. Instead, we will focus on offering lending tools to to help people manage their day-to-day finances more effectively. We want to give people immediate visibility and control of their money, rather than tempting them in with a low headline price and then recouping costs elsewhere.
You may start to see glimpses of new features or pricing that we’re trialling over the next few months!
