Pre-ordering authorising the full amount months in advance


(Peter Shillito) #1

I need some help understanding something that Monzo appears to do differently than traditional banks.

Today, I placed a pre-order for a CD on the website CDJapan. They pre-authorise the full amount of the order when the order is placed, but don’t take the money until it ships, which in this case is not for over a month.

With my old bank, it would come off the available balance, but wasn’t included in the current balance (i.e. what I actually have to spend). Monzo, however, seems to treat it as a finalised transaction and take it off my balance immediately. This leaves me with a few questions.

  1. If this pending transaction took me more than £20 into overdraft, would I have to pay charges, or would I have leeway because I technically haven’t been charged yet and won’t for another month or two?

  2. Could it be possible to mark longer-term pre-authorised transactions as such so they don’t blur the live account balance? Perhaps with a date expected to be properly charged (i.e. the day before release date, etc).

I appreciate that Monzo takes the balance down immediately for transactions, but if I’m budgeting for a big purchase of, say, an expensive anime figure from Japan that I need to pre-order a few months in advance, and I’ll have the money at the time but not right now, this setup seems a bit confusing…


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(Andre Borie) #2

By law, pending transactions won’t be counted as part of your overdraft usage, so I’d say it’s fine as far as fees go.


#3

This sort of stuff is why I dislike Monzo’s approach of not showing the actual balance in the app, and not distinguishing pending transactions more clearly.

But, @Rjevski is correct, and it’s apparently part of the overdraft agreement that pending transactions aren’t taken into account when calculating overdraft charges. Source

Also, it is my understanding that your pre-auth will automatically be released after 7 or 30 days (depending on the type of pre auth they did - see this and following posts). This will appear like a refund to you, though it technically isn’t.

For that sort of purpose (long term pre-auth, especially when largish amounts of money are concerned) I really prefer my credit card …


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(Andre Borie) #4

Wouldn’t your credit card also release the authorisation after like a week?


#5

They should, yes.


(Nick) #6

Yes, but I think the point is it wouldn’t intefere with any day-to-day banking (also bonus Section 75 protection if largish sums involved).


(Jonathon) #7

Even with a credit card you’d need the amount available still though? Like a hotel pre-authorisation.


#8

Yes, you are right. Actually: no you don’t. With a credit card you need to have the credit available, but not the amount. That’s a very important difference.

Because it wasn’t directly relevant to the op’s question, I didn’t elaborate. But since you ask:

I don’t know what sums are involved here, so lets take another hypothetical example: Let’s imagine I’d preorder an iPhone, and apple would pre-auth £1000.

If I use my debit card:

  • I must have £1000 in my account at the time I place the order
  • I must keep £1000 + any money for direct debits and day-to-day spend in my account until they collect the money, or the pre-auth is reversed.

If I use my credit card:

  • I don’t need to have the money then. I just need to have available credit.
  • If I already have £1000 (and, again, I don’t need to), I could leave them in my interest bearing account until the statement due date after the payment is actually collected, which may be months later.
  • Until the same day, my direct debits will be completely unaffected.
  • My day to day card spend would only be affected if I have no more available credit (on this or other cards) AND no more money in the bank.

(Just to be clear: I’d never buy an iPhone :wink: )


(Jonathon) #9

Exactly. So the way Monzo and any other bank work are the same, just that Monzo only give you the amount you can actually spend in your account as opposed to that as well as a balance which isn’t actually spendable.


#10

In that sense: Yes. But I feel Monzo doesn’t give me an accurate picture of my finances. If a transaction is authorised but not settled, then I still own that money. Whether I can spend it or not. It just feels wrong to me to pretend otherwise.

It may pedantic, but I personally don’t like that with Monzo I get the impression I have less money than I technically have.


#11

I’m the opposite. If it’s going out of my account I want it to be gone because I know it’s been allocated elsewhere.


#12

Yep. I know: Lots of people love that. For many it’s the main attraction. :slight_smile:

I guess for day to day spend, I can also live with it. But for larger and longer pre-auths (especially when they may never be collected, such as hotel deposits, pay at pump, or pre-orders) it would really annoy me.

Anyway: I’m glad there are options for both of us, so don’t take me wrong: I’m not against Monzo acting as they do, but it doesn’t suit me (especially so, in a case like this).


(Peter Shillito) #13

So, if I understand right, the pre-auth will cancel itself after a bit and then, when the actual request for payment arrives in a couple of months, it’ll come out again but for good?

Also, cheers about the overdraft details. That makes me happier, though it’s gonna muddy the water on figuring out when I’m actually going into overdraft vs just taking the pre-auth into account…


#14

Yes

Yes.


(Jonathon) #15

But you don’t have the money. The only way to get it would be to tell the company who have it blocked off and they would release it, like a refund.

I get what you mean, but I don’t think in reality a hold is any different to a purchase. I don’t agree with holds in the first place. Pre-order and pay on ordering or pre-order and no charge until the product ships.


#16

I think we may be conflating two issues here:

  1. I would use a credit card. In that case I wouldn’t need the money.

  2. If you use a debit card, then you would need the money, but
    a) it’s still technically incorrect to say the money is gone when it isn’t, and I like technicalities (although I fully acknowledge that a lot of people won’t care about these technicalities), and
    b) as @theshillito points out, it really can make it quite tricky to figure out when your overdraft charges actually kick in (assuming the pre-auth isn’t for £1000, but for £963.65, and you have forgotten the exact amount in 3 weeks time, and your math skills are as bad as mine).


(Peter Shillito) #17

In this specific example that I’ve experienced, using a credit card would result in some currency conversion fees as CDJapan charge in JPY, so I’d want to use Monzo to avoid those fees (I already have a zero interest credit card and that charges 2.75% on foreign currency transactions).

I guess it’s also worth mentioning that, so far, CDJapan is the only company to do it like this that I’ve experienced, but I’m sure they won’t be the last. All other companies I’ve tried either do an active card check or a £1 transaction that’s immediately refunded.


#18

It sure seems like a bit of a weird thing to do. Especially given that I cannot imagine any bank holding on to a pre-auth for more than a month, which is the timeline you mentioned.

For foreign currency transactions I always use my Halifax Clarity card: Uses the same exchange rate as Monzo, and no fees.


(Change Works) #19

Depends on the credit card; my Nationwide credit card doesn’t charge for currency conversion.


(Peter Shillito) #20

I can’t get anything Halifax as they refuse to let me use a non-gendered title (see http://dontgender.me/bank.html) but I believe there are other cards that offer no foreign transaction fees. To be honest, I’m hoping to remove any reliance on credit at all, it’s just at the moment I’m dipping into overdrafts each month, which is why I made this topic when I did.

I think the remaining issue is just how Monzo portray the account balance taking authorised but uncollected payments into account, but I guess that would be some major changes to the app…