This is the main think preventing me using Monzo as my main current account. So many other banks pay interest, even the main competitor Starling pays 0.5%!
This is currently a Monzo Plus feature.
Although Monzo Plus is not available to new customers. A new Plus account is in design now.
You can read more here:
Does anyone really care about 0.5%?
It’s going to equate to nothing on a live account month to month. Doesn’t it disincentivise using pots?
You would need to keep an average daily balance of £2400 to get a shinny pound each month.
Regardless of bank it doesn’t really pay to keep anymore than you need to pay the bills and spend for the month ahead, everything else in easy access or longer term savings or investments.
I use Lloyds Club and it’s 1% on balance for free, which is pretty much what Monzo pays via savings pots.
I’ve added my vote, but I can’t see Monzo doing this on the free account when they can sell you it as a perk like a good ol’ legacy on plus or premium or metal or whatever materialises.
I see this request quite a lot and I can never understand why - it would be great to hear more about your thoughts on the benefits of this.
If we take a Marcus (from Goldman Sachs) savings account as an example. It used to be market-beating but now pays 1.35% - still one of the best but I think there are a couple of offerings that can beat it these days.
The account offers completely unrestricted access with unlimited withdrawals, instant transfers in and out (no waiting several working days like some accounts), and no limit. On that basis, I always struggle to understand why would anyone want interest on their current account balance of anything less? If the worry is that you have bills to pay and can’t keep it in the account for a long time - that’s no problem because the transfers in and out of the account are instant.
If the interest rate is market-beating or even matching then of course, that’s a different story. This is why Monzo made the right choice with their initial Monzo Plus current account interest offering, paying 1.5% on a low balance threshold (£4,000), rather than a lower rate on a higher balance threshold. The Marcus account at that time was also paying 1.5% on all balances, not just up to £4,000, but I could at least see an argument that if the interest rate is the same then it’s more convenient to keep it in your current account and not have to deal with transfers.
But I don’t understand why it would be a consideration for anything less (like the 0.5% you reference Starling as doing). Surely you are just worse off by doing this?
I’m no financial expert but I don’t see how there is any negatives to earning interest? The majority of current accounts offer at least some kind of interest! Currently I have a savings pot open with Monzo, which pays 1.15%, so in reality the 0.5% interest offered by starling is irrelevant to me. But I know several people who were undecided, and the interest offered by starling tipped the balance. So surely there’s no downside to offering even a small amount of interest? More customers for Monzo and more money for us?
Although I do understand your point. 0.5% is very little, and any excess cash would be better off in an ISA or a savings account. But surely something is better than nothing, right?
Phrasing is good. There are negatives, literally. Earning anything less then the rate of inflation is a net negative growth on your savings.
0.5% would disincentivise people from using pots. They shouldn’t do this imo.
My view is a current account is just here for him paying, wages paid in etc, any savings either open an interest baring pot or an external savings account. I’m not that fussed on my account not paying interest as I move money to other accounts for savings purposes
See here: The Big Monzo Plus FAQ
If monzo have £1bn in customer deposits (as estimated above), paying 0.5% a year will cost monzo £500,000 per year. So while it’s not a huge amount for us individually, it soon adds up for monzo. Will it get them more customers than if they spent that amount on advertising? I’m not so sure…
Oh definitely - I’m definitely not saying that interest-paying current accounts are pointless - I am just saying that if savings accounts exist with a higher interest rate, with completely unrestricted access, why does it matter/why would you ever use interest-paying current accounts to store money when you could get more just by moving it somewhere else?
Monzo are already earning 0.75% from the Bank of England with all customer deposits as with any other bank.
That doesn’t change the cost of the outgoing payments. Thay would still take £500,000 off the (already negative) bottom line.