Does anyone on here think that Monzo’s proposed overdraft fees are expensive?
Can’t help thinking that Monzo have missed a trick here in their quest to offer something different from the banks we are all used to. Yes, the suggested way whereby the app informs us how much we are accumulating in terms of fee seems great and yes these seem completely transparent and easy to manage. But 50p per day? Really? How is this different from any of the other big four high street banks?
I stumbled across a post written by the Deputy CEO - Paul Rippon in September 2016 when Monzo were thinking about how an overdraft pricing structure might work and the following extract stood out to me:
“the ‘average’ rate of overdraft interest charged by UK banks is about 20%. In other words, if you borrow £100 it will cost you about 5p per day. However, over the last few years many banks seem to have concluded that their customers don’t understand percentages, and so instead they charge 50p or £1 per day for going overdrawn. You do the maths! I reckon that’s more like 200-400% in terms of interest. And I thought payday lending was supposed to be expensive…”
I read that and thought that was a fair reflection of the current state of play for many of us. And then I looked at what Monzo were proposing for their overdraft facility - 50p per day! So Monzo, well done - you’re right up there with the payday lenders!
To me, that doesn’t look very good. Firstly if an average bank (according to Paul) charges 20% (or 5p per day) for every £100 (which seems reasonable to me) then why not at least follow this pricing structure. Secondly, by setting the fees at a daily rate of 50p Monzo are inadvertently positioning themselves amongst the other big bad high street banks and charging the 200 - 400% figure which according to the Paul is pay day loans interest!!!
My main bank is HSBC. I personally do not use my overdraft that much but I know that if I do go overdrawn by anything up to say £300, by Paul’s maths its only going to cost me 15p per day. Over 15 days that’s going to be £2.25. Over the same period, Monzo propose to charge £7.50. I don’t know about you but to me that doesn’t look good or indeed competitive, at all. Equally, it doesn’t make me want to make the final leap and move all my banking to Monzo.
Yes charge a daily fee, be transparent on fees accrued, but above all be competitive and me us feel like we are being offered something different because at the minute it feels like we’re not.