Pot as overdraft


(Shane Knight) #1

I’m not sure if this has been suggested yet, but I would like the ability to create an overdraft pot and set it so that should I go overdrawn the money from the pot is used rather than having to apply for an actual overdraft. Overdrafts are a saftey net, but I’d like the option to create my own before I ‘borrow’ from the bank.

Shane


Monzo vs Starling - heart versus head
(Andre Borie) #2

Would you actually be charged for an overdraft if you’ve still got money in pots? I thought I read somewhere that as long as your overall balance (including all pots) is positive you wouldn’t get fees which makes sense. If that’s true then you can just get an authorised overdraft (so payments don’t decline) but you won’t actually be charged for it unless it goes below what’s available in all your pots.


(Shane Knight) #3

Oh I didn’t see that, if that’s the case then all is good :slight_smile:


#4

Not quite true, in the ‘help’ section on the app it says that they won’t charge you if you move money from a pot on the same day you go overdrawn, to put your account back over 0. If you leave it in a pot you will be charged the next day…


(MikeF) #5

That fits with what I thought I’d read. In overdraft terms, potted money is treated as if it were in a seperate account so doesn’t offset your borrowing.


(Simon) #6

I quite like this idea. A buffer pot I can keep a couple hundred :pound: in which would act like an overdraft. Although if Monzo plans to make money from overdrafts they might be shooting themselves in the foot.


(MikeF) #7

Not really. You’ve either got the money or you haven’t no matter where you stash it. Transferring it from a pot or another account aren’t so vastly different in effort terms.


(Peter Roberts) #8

Not offsetting the value of pots against negative balance is as far as I see not a good thing for anyone except Monzo because it means they are getting paid when they otherwise wouldn’t

I can’t see any way to justify that this sort of offsetting shouldn’t be done aside from that this is the implementation Monzo happen to have developed. Anyone see something I don’t here?

As an aside I believe Starling does offset overdrafts with goals?


(Andre Borie) #9

Yep that seems strange, I’m not sure if this is malicious or just a technical oversight. Starling doesn’t charge you unless your main pot balance is lower than all your other pots combined (at which point you are actually dipping into your overdraft).

It could be to make it simpler for the user, to be able to say “negative balance in the main account = overdraft = fees” instead of having “two” balances, one for the main account and the second one which is the sum of all pots and so the one used when calculating the fees. However I’m not sure if the simplicity benefits outweigh the drawbacks. I personally do not care either way but I would expect a lot of people to prefer less fees as much as possible.


(Pawel Pietrzak) #10

My issue with pots is that I would like to be able to set a pot for my regular payments (mortgage and bills). I could set the money aside in the pot link DD and forget about it. This is particularly important in absence of the real overdraft facility. Otherwise you have to watch you regular payments and transfer money out of the pot in time for a Direct Debit.


#11

For comparison, Starling have Goals their version of pots, If you overdraw with Starling you have a negative balance but no interest is charged whilst the money in your goals is greater than the overdraft.


(Dicky Moore) #12

I totally agree with this and I am suprised is not already implemented. If my available balance is £-200 and I have £300 in a pot then Monzo have £100 of my money and shouldn’t be charging me for an overdraft.

Swapping money to and from pots just to avoid overdraft fees is the exact kind of needless admin Monzo is meant to negate.


#13

It works the way you want at Starling, so it puzzles me Monzo don’t have the same approach to overdraft charges.


#14

+1

Great idea


(Daniel Hunt) #15

Totally agree - it seems very unfair to be charging an overdraft fee if there is actually still a positive balance in the overall account.

If pots were actually separate accounts then I would be OK with the current approach (as this would be the same as having separate accounts for current account and savings account in the legacy bank model) but as the pots are really just a “ringfencing” of money all within the same account it doesn’t seem right.


#16

This is actually an interesting question:

We have previously postulated that banks can only charge interest on the actual balance in an account. This was assumed to be the reason why pending but not collected card payments aren’t included in your balance for the purpose of calculating overdraft fees.

If pots are just ring fencing money in my account, without actually taking it out of my account, then at first glance that’d appear to be similar to the ring fencing done for “pending transactions”, and by the same logic one would assume that it would be against the law to charge for an overdraft if I have -£100 in my main account, but +£200 in a pot, as my total balance would still be positive.

Clearly, Monzo doesn’t think so. So were did I go wrong? Does anyone have theories?


(Andre Borie) #17

Wouldn’t a pot count as a second account? Does the law exactly define what an account is? When in a legacy bank and you have two accounts open (when I was with Nationwide they have me a really basic savings account), nobody sues them if they transfer all their money into a secondary account and incur overdraft charges on the primary account, so unless pots don’t fit the legal definition of an account (if there is one) then Monzo could probably use the same defense.


#18

Well, it might well count as a 2nd account. However, given that Monzo regularly insist that pots are not separate accounts (most recently here), you can’t - how to put this - have your cake and eat it…


#19

Tell me my pot account number and sort code and I’ll agree with you :slight_smile:


(Andre Borie) #20

An account number/sort code is just a technical means for a third-party to pay money into your bank - it’s up to the bank to actually match it to your “account” or whatever they want to call it; technically nothing prevents an “account” from having multiple account numbers/sort codes.

I was asking what was the legal definition of an “account” as far as the law relating to overdraft charges was concerned. If the definition of an account is simply a place where your money is, then I’d say that pots definitely fit the profile.