I think if Plus members would have preferential overdraft facility let’s say from £100 overdraft, that would increase a lot the numbers of subscribers.
If I have an horrific credit rating, paying £5 a month isn’t going to make Monzo take the risk to lend me money that I probably won’t pay back.
And why would I pay £5 to have one? When most places will give me one for free?
Typically with premium accounts, the overdraft is still judged as per standard lending criteria but the first £xxx is free. I wouldn’t expect any bank to provide an overdraft to a high risk borrower.
That’s what I assumed the original post was referring to.
I suppose there would need to be a calculation on how much a cheaper or free overdraft limit or partial limit would cost Monzo Vs monthly subscription fee.
When I bank with Lloyd, I think the first £150 were free but you need to pass their lending criteria.
The FCA asked lenders to review fee-free overdrafts in connection with personal current accounts with monthly maintenance charges at the end of last year.
Customers were often keeping their account just for the overdraft buffer, when the other features and benefits should be the motivation for keeping the account. In many cases, they’d be far better off paying the overdraft fees instead, when the other benefits weren’t needed or applicable.
Many banks have recently lowered these fee-free limits as a result. The fixed monthly account fee also disincentivised customers from reducing their overdraft borrowing during the month.