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.
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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Anarchist
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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.
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?
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?
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.
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.