Overdraft position


(Alex Sherwood) #21

In case anyone’s wondering, I’m guessing that Jonas is referring to this post -

but personally, I don’t think it’s a good idea to rely on other user’s memory of the model’s that’ve been discussed & it’s worth bearing in mind that the model keeps changing.

So it’ll be helpful to have a confirmation from the team of what’s been decided - for now..


(Tristan Thomas) #22

This is coming v soon :slight_smile:


(Jonas Templestein) #23

Apologies, I probably jumped the gun a bit in my presentation yesterday. Just for the sake of full transparency, here is what I said yesterday:

  • we’re beginning non-staff testing of overdrafts next week
  • the pricing we are testing is 50p/day with a £20 buffer and no interest rate

A full blog post explaining how we arrived at that conclusion, how testers are picked, etc is coming next week :slight_smile:

Thanks for holding us to a high standard @alexs!


Applying for an overdraft
(Simon Porter) #24

I won’t be bothering with an overdraft at 50p a day. My current bank, Nationwide, charges the same and it’s one of the reasons I despise it. It penalises those with a small overdraft as cost is the same if its £100 or £1000


(Alex Sherwood) #25

To put the 50p a day figure in context, if you borrow more than £350 with Monzo you’re getting a better rate than Lloyds (who are about to start charging 1p for every £7 you borrow) are now offering..

So it might sound like a variable rate is better but in the end, if you’re one of the 7/10 people who has an overdraft of £700 on average you’re a lot better off using Monzo’s.

Whether that encourages the ‘wrong’ behavior is up for debate of course :slight_smile: the major benefit that I can see with this approach is that users who go into their overdraft on day x of the month know exactly how much they’ll pay at the end of the month, rather than having to predict how much they’ll ultimately end up spending & therefore borrowing, in that month.

In other words, it removes uncertainty & therefore, anxiety which is one main benefits of Monzo already..


(Amelia Ikeda) #26

I gather that Monzo are going to be more inclined to try and help people manage their money than ream people further in debt for more money than they have — the only reason a lot of people stay in perpetual debt is because bank fees are pretty crippling (for example, I’m paying an average of £50 a month for my Lloyds overdraft due to extra fees, and I’m gonna switch my Lloyds account to the equivalent of a debt account, pay it off, and close it when I switch to Monzo fully).

Also: £20 buffer sounds amazing considering offline payments and TfL are both jerks :stuck_out_tongue:

This can help people actively climb out of debt, but can also get them further into it. I expect @StuartM will likely be involved in helping the people with financial difficulties part :smile:


(Stuart) #27

Yes I will be! Also i’m completely against any excess/over limit fees and I agree that it is a big reason why people stay in debt or struggle to get back on top of things. I’m glad we aren’t charging them :grinning:


(Simon Porter) #28

I guess over a certain amount the fixed amount per day is preferable. I only have a small overdraft with Starling - £250. The £1 or so amount they change vs £15 seems a lot more reasonable. They charge 15% interest.

Maybe a compromise would be charge interest but capped at £15 a month?


#29

50p a day is already £15 a month. So if you’re maxing out your overdraft you’d be no better off.


(Simon Porter) #30

But you would be if under £350 £1300 overdraft. The interest would be cheaper


#31

I rarely use my overdraft but I think Monzo is on the right track here but perhaps raise the buffer? With First Direct you get the first £250 interest free.


(Jamie 🏳️‍🌈) #32

Comparison with the Starling slider shows me I’m better off with a Starling overdraft under £1300. Over that amount :monzo: Monzo is cheaper per day.


Image is screenshot from my Starling account app. Interest rate on that offer is 15% EAR.


(Simon Porter) #33

Thanks @j06

That was kind of the point that I was trying to make. Although the amount that favours interest over the fixed fee is far higher than I expected.


(MikeF) #34

The concept of ‘testing’ an overdraft is interesting. I don’t use one (but do have one) so to test one would be a deliberate choice not to allow extra money into the account I guess. That could be interesting academically but what would it do for a credit rating?

I’m not clear what the goals of the test would be either. I hope that will all be spelled out when the public test is activated.


#35

14 APR on some info 15 EAR on others


(Frank) #36

I’m not sure what difference this would make for income generation for :monzo: but I would like to see something like:
£0 fee for up to £50
£0.25 for £50.01 to £200
£0.50 for £200.01+

Also would like the fee to only be applicable based on the position of your account at midnight.

What would help me the most though to manage an overdraft position is the instant notification that I am in an overdrawn position so I can rectify the situation. This for me is what gives :monzo: the edge in general.

I have received overdraft fees in the past not because I did not have the funds but because the funds were not in the right account at the right time.


(Neil) #37

I too have a current interest free overdraft of £250 with Barclays that I from time-to-time dip into for 4/5 days at the end of each month; if Monzo could offer the same I would definitely switch my banking life to Monzo.


(Jamie 🏳️‍🌈) #38

That overdraft, for five days, will cost £2.50 with :monzo: Monzo. You won’t get £250 fee-free.


(Gareth) #39

You pay for that ‘free’ overdraft with either fees (Additions/Packs), assets (Premier) or potential (Student/Graduate).

https://www.barclays.co.uk/current-accounts/bank-charges/


The Overdrafts Pricing
(Neil) #40

The B*****ds - didn’t know that Gareth, I have the travel and tech pack add ons and they charge £23 a month for that!!!