As good a reason as any to consider it might not be a great thing to do.
I think I’m putting this change on the steadily growing pile of reasons to move away from Monzo.
Personally I’ll only really be affected by the removal of the £20 buffer (which, why was that removed? No reason given in the post). But the main things are: you’re giving a lower rate to those already in a better financial position, and still think that playing on people’s cognative biases with rates like 19% and 39% is cool. It’s not.
Remember when you wanted to be better than that, Monzo?
I’m not sure what the big deal is here. Overdrafts are a type of loan. Providing a loan involves risk on the part of the lender. Some customers are more risky than others. This does not necessarily correlate to how ‘wealthy’ they are, it is related to the risk of not getting paid back (which is affected by more than income/wealth). Monzo could either penalise the lower risk customers by charging everyone a higher rate, or penalise the higher risk customers by not offering them overdrafts at all. Or they can have multiple rates.
Whether it’s 13% of Monzo users or 13% of overdraft users it is still 13% too many
Especially when many of the 13% are likely to be in the 39.9% group and may well be living close to the breadline or otherwise struggling financially as it is which is why their credit scores are lower
If you were to lend to 2 groups of people with bad and good credit, you’d need to charge the group of people with bad credit history a higher fee to mitigate the risk. I’m not sure how this is a problem, it’s a tried and tested approach by most companies that offer credit facilities and applies to credit cards, loans, mortgages and overdrafts.
The same thing also applies when people take out insurance, those considered more likely to claim pay a higher premium.
Does anyone who’s wringing their hands about those ‘living close to the breadline’ have experience or expert knowledge on the financial issues facing people in that situation? Or is this a lot of assumptions by people without any experience of financial hardship?
It wasn’t the same score, monzo told TransUnion its criteria and TransUnion generated a score and this one was completely different to the one we see, so lenders don’t see the pointless score
People seem to be asking why Monzo has removed the £20 buffer. Isn’t it obvious? To make up the money they have lost by going to an APR method rather than the fixed 50p method.
I agree with the shift to an APR method as a good move but it is a shame they removed the free buffer.
This is the uncertain part on if it’s the actual “score”, or of it feeds into a Monzo system to generate an internal score - I asked for clarification, but waiting to hear.
From my POV, as long as things are clear, and people are being treated equally, I’m not too bothered if the rates are more than other banks (people have options, Monzo won’t be the best at everything).
The issue with any lending from Monzo seems to be the “finger in the air” way of judging each customer. No one can tell for certain what the criteria is, and the results make for some confusing reading.
1 Like
phildawson
(Sorry, I will have to escalate this.)
91
Which dev told you that Monzo submit criteria to TransUnion to get an entirely separate score? Fair play if that’s fact, that’s news to me and I’ve spoken with about five devs in depth about it and totally under the impression that Monzo used “the score” given, nothing about submitting criteria to get that special score that’s different. That sounds plausible as TransUnion could have a service that does scoring out the box.
IMO from reading Monzo’s posts about the tiers. The likely people who will get offered this higher % wouldn’t have been eligible for an overdraft previously.
By introducing the higher rate they can give more people the option to have an overdraft if they wish.
Just because starling has one rate and it’s low could mean they hardly offer overdrafts to anyone.
It’s about giving the user a choice if they’d like one or not.
do don’t always go 
though