Our overdrafts are changing

Back in June 2019, the Financial Conduct Authority (FCA) announced that it was introducing new rules to fix the overdraft market, encourage a healthier use of overdrafts and let borrowers compare rates.

This means that between now and April 2020 we’re moving everyone over to a personalised interest rate based on your credit score, so we can no longer offer overdrafts at a fixed fee (the 50p per day we offer now).

We’ve also used this time to make some more updates to our overdrafts.

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It’s a real shame that the FCA’s forced Monzo to drop their fixed fee & switch to a % based overdraft instead. I know why they did it but Monzo customers asked for a fixed fee because it was easier to manage.

Anyway, it’s great to see that Monzo’s working on tools to help us understand what we’ll end up paying when we use our overdrafts with the new fee structure.

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It might be worth mentioning (assuming it’s still true) that you’ll only be charging people in overdraft on cleared transactions, not pending ones.

It might, therefore, be useful to make clear in the transaction feed which transactions are still pending. I think that Santander handle this better. The pending transactions are displayed separately at the top of the feed so that it’s crystal clear.

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When giving us the option of switching I assume you’ll also be letting us know if we’re eligible for an overdraft and how much based on your new lending criteria?

This is actually pretty good, as long as Monzo clearly shows how much someone will pay over the course of time they are in the overdraft.

A little disappointed joint account overdrafts weren’t part of this work :cry:

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Thanks for the update. It’s a shame that we’ve gone from an easily understandable flat rate to three APRs - but it is what it is, I suppose.

On a related point, can you tell us when we’ll know which rate we fall under? And for folk that don’t have an overdraft, I’m assuming you’ll still score them and allocate an APR for those rate cases that they go overdrawn anyway? Or will the highest rate apply?

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Why have you chosen to remove the £20 buffer?

so we’ve introduced higher limits for some people

Can we request a higher limit?

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This would be really useful. I’m not sure that separating the transactions is the answer, but somewhere I could tap to see the cleared vs pending balance would be super helpful.

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You get a notification though once you will start paying charges

This is how Santander show it. Beneath this is the transaction feed, and the pending items are shown separately at the top and italicised.

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Iirc it’s part of the new rules.

Oh really, I wasn’t aware of that.

They should probably include that info on the blog imo

Yes, they really need to advertise this fact much more prominently

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Nationwide had to do it too, if you skim read this it’s in here:

Interesting

FirstDirect have a £250 buffer but think thats staying?

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Yep…

The first £250 of overdrafts will still be free, so you’ll only be charged if you borrow more than that. If you have a 1st Account linked to an Offset Mortgage, you’ll still be charged your mortgage interest rate on anything you borrow, even the first £250.

39.9% after

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How often Monzo will check credit file?

For loans it is monthly, assume this will be the same.

FCA: Fixed daily overdraft charges are wrong
Banks: OK. Let’s just say 40% APR then
FCA: That’s not what we meant
Banks: Rules are rules

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