POLL! A Monzo Credit Card? Why Monzo? Why not others? 💳 :monzocard:

I think a Monzo credit card should definitely have a points or cashback feature!

There’s only really Amex that do these in an abundance, but not everywhere accepts Amex so the only competitor really is Barclaycard :man_shrugging:

It would be good if any cashback earned could automatically go into a savings pot, or the “credit card” pot where the payment due goes out of could have a competitive AER (a bit like the roundups on Chase) etc.

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I also think credit sharing or additional card holders who aren’t at the same address would be a good shout.

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What if it could work a little like an offset mortgage? If the credit card balance could be offset against the credit balances in any of your pots? This would make the principal of a single line of credit really work well.

Imagine you had a 10K line of credit you could split between overdraft, credit card and Flex. But let’s say you have collective a balance across all of these of -5K but on payday you get 3K land in your account plus you have 2K in a pot. The daily interest calculation would be based on a net 0 lending figure. (Premium account credit interest would be 0% as net account balance is 0)

(I appreciate 3rd party pots wouldn’t be included in this)

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Monzo don’t like the idea of consolidated balances. People have been asking for it for ages but it’s always ignored or shot down. Never going to happen, maybe Starling will do it

I wouldn’t ever say “never” - but I’m afraid the main reason this is unlikely to happen is it’s commercially unviable.

The sad truth of credit cards is that they mostly rely on a small population of customers who are stuck in debt to fund the the population of customers who never pay interest and pay off in full each month. By doing an offset credit card - what will happen is that you’ll exacerbate this dynamic even further - you’ll charge even less interest to “customers who have money” and therefore you’ll need to charge more interest to “customers who don’t have money” - effectively further driving the wealth gap :frowning:

I personally don’t expect Starling to launch their offset loan thing again. I could be proved wrong but to make it work commercially they’ll need to charge higher APR’s than they would otherwise. So although it may look like a positive for some customers - it’ll be offset by higher APR’s for other customers.

The exception to this is if you were able to attract more customers - eg. Attracting 50 customers to a product that makes £100 per new account is the same as attracting 100 customers to a product that only makes £50 per account - but i think it’s unlikely you’d get the incremental accounts needed to make it work.

FWIW - It’s also quite complex to clearly explain to customers - this community will probably be able to understand because everyone is highly financially literate but to an everyday customer it’ll be hard to explain.

The reason for this is that AMEX doesn’t abide by EU law (or rather they found a loophole). They’re able to charge merchants 1%+ interchange while everyone else in the UK is limited to a max of 0.3% (on a credit BIN). AMEX also charge extremely high APR’s.

Again - this is just another example of some customers (those with money) winning out and other customers (those without money) losing out :frowning: And to be clear they lose out in this case because the merchant has to raise prices to offset the 1% interchange fee and because of the higher APR’s.

Sorry - this was a very cynical post.

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And I’m reminded of this article from the Money Box’s Paul Lewis: How banks exploit us by making services too complex - How banks exploit us by making services too complex

Banks make money because they are better at arithmetic than their customers. They know that if they fix monthly repayments on a credit card at 2 per cent of the outstanding amount with a minimum of ÂŁ5 it will take 25 years to clear a ÂŁ2,000 debt and they will have been paid ÂŁ3,500 in interest.

They know that after 43 years of charging 1.5 per cent a year on a pension pot with 4 per cent growth they will have taken the equivalent of a third of the pot. Even for the section of the population that is not functionally innumerate those are difficult sums.

And where the arithmetic could be simple the banks devise ways to make them complex. A theme that has run through my working life is explaining complex things to people in a simple way. Over the years I have come to believe that this process of making things complicated — complexification, as I call it — is deliberate. And it is anti-competitive.

Imagine if you went to fill up your car. The local garage is Esso and the price is 136.9p a litre. But Sainsbury’s sells it for 132.9p a litre. So you drive the extra mile to Sainsbury and save yourself a couple of quid.

Suppose instead that your garage charges 129.9p a litre plus £5 to enter the forecourt. That would be dearer. But if you agree to make it your petrol station for the next 10 visits it waives the forecourt charge. Is that still cheaper than Sainsbury’s at 132.9p, which charges you £2 to visit and then gives you back £1 if you fill up for two consecutive times?

Such an approach would be retail madness. But it is often the way you are charged for personal finance products.

I won’t post the whole thing, but the article goes on to talk about how all sorts of products are made more complicated than they need to be.

Routine (“every day”) spending on credit card makes basic budgeting more complicated than it needs to be and I’ve pretty much given up on it, despite losing out on cashback. It’s madness that spending on credit gives you extra legal protections (see above for how apparently simple financial decisions are made needlessly complex) but this means credit cards are still useful occasionally.

Would I use a monzo card? Maybe. I keep asking myself this every time this thread pops up. Despite my reluctance, if monzo offered even 0.25% cashback (in line with Lloyds and barclaycard), and bill splits worked on credit card purchases, I probably would end up using it for every day purchases.

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Like Halifax was doing with current and savings accounts, credit cards, loans and mortgages twenty years ago with Intelligent Finance?

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By doing an offset credit card - what will happen is that you’ll exacerbate this dynamic even further - you’ll charge even less interest to “customers who have money” and therefore you’ll need to charge more interest to “customers who don’t have money” - effectively further driving the wealth gap

You mean like how Monzo charges differing APRs to different customers? :thinking:

The sad truth of credit cards is that they mostly rely on a small population of customers who are stuck in debt to fund the the population of customers who never pay interest and pay off in full each month

I’ve never fully understood why CC companies keep those customers. They obviously get interchange fees (which are pretty small, albeit I believe are higher than debit cards) but then they have the statements etc that they send out, cost of the cards, call centre contacts etc. Feels like a difficult way to make money. Are they restricted by regulations to not close those accounts? Do they gamble on those customers someday needing something bigger and stretching the payments?

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I think @TheoGibson gave us the answer in his reply:

The sad truth of credit cards is that they mostly rely on a small population of customers who are stuck in debt to fund the the population of customers who never pay interest and pay off in full each month.

Basically, those who are stuck in a debt trap end up subsidising the products for the well-off. If what you suggested happened, then there would be fees all round. Probably a societally better outcome, but no one likes to lose out, especially if folk are happy in their ignorance about how these things actually work…

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Basically, those who are stuck in a debt trap end up subsidising the products for the well-off. If what you suggested happened, then there would be fees all round. Probably a societally better outcome, but no one likes to lose out, especially if folk are happy in their ignorance about how these things actually work…

I’m probably being daft but I’m not seeing the answer. Why do they still keep the accounts who are being subsidised? Why not make a higher profit margin by only keeping the ones in the debt traps?

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Oh sorry, I thought you meant closing the accounts of those in the debt trap, rather than well-to-do, never pay interest folk. :man_facepalming:

I’m guessing but I think that 95%+ of users wouldn’t pay any fees (or just pay marginal ones). I suspect the answer is a few-fold: they only need one or two percent of users to forget to sort things out after, for example, the end of a 0% deal to turn a healthy profit (so it’s a numbers game), they want credit cards to be seen as an affluent thing, rather than a device for the poor (which would probably then attract additional regulation), and (more fundamentally) when someone opens a credit card account, all the credit scoring in the world can’t tell you if they’ll ultimately default (commercially bad), be in the debt trap (commercially good), or pay no fees or interest (commercially bad).

That’s just my guess, though. :person_shrugging:

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Reading my reply, I don’t think I made it clear which customers I was talking about, sorry!

They do tend to market it on it being an affluent thing (when the reality is their profits come from the opposite!) so that makes a lot of sense.

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I’m not saying we’re completely innocent of this dynamic either :frowning: but it’s also not a binary 1/ 0. There’s a sliding scale.

A few reasons are:

  1. They use sneaky fees to catch people out - eg. missed payment fees, FX fees, ATM fees, losing your balance transfer promo if you miss a payment, etc.
  2. They hope that you eventually pay some interest.
  3. There are ecosystem benefits (this is an important one for us) - eg. If you get and use Flex, even if only the interest free options, then you’re more likely to move more of your financial life to Monzo, get plus/ premium, etc.
  4. It’d just be really odd to not accept these customers.
  5. They float around ÂŁ0 profitability - so not massively negative, just not highly positive.

It’s much much less than this.

This is really interesting - and also helps answer the above question

For what it’s worth, I’m the same as you - I don’t use a credit card - I don’t care about the £100 - £200 cashback I might get per year.

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Most people I know only use credit cards for a large purchase they want to split over a few months, thus paying interest. I suspect the number who use them for day to day spending is relatively small.

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Why keep accounts that never pay interest. Mostly it is a risk management excercise. Depending on different profile of customers, different set of customers will get into debt trap at different times. To ensure one always has some interest paying customers, one wants to have a diverse set, when things improve for some versus others.

Plus credit cards do have slightly higher interchange fee, thus for example Monzo makes slightly more money of people using their flex card versus the debit card.

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If people use the virtual card yes, but I would be curious to know how many flex a transaction from their debit card rather than using the virtual card number.

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Oh and long 0% balance transfers!! :+1:

Anymore news on this? :pray:

Closest we’ll get anytime soon is the physical Flex card I reckon

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In an ideal world, someone like Monzo (or Starling) could acquire Tymit.
Tymit is a pretty good product, just (in my opinion) quite poorly executed.
I’m sure either Monzo or Starling could make a better job of it.

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