Smoothing of annual payments into monthly amounts

It is very common for subscription based services to offer discount such as 1 month for free if the entire year is paid up in full in one go. That is cool and we all love to save, but it often buggers up budgets as the entire payment comes out from one months budget, which would not be the case if paying monthly and prices for services are usually considered to be charged per month.

So… I was wondering if it was possible to support some type of smoothing of these types (or any type) of payments.

For example, I select a payment for say, Amazon Prime (£79) in my timeline and tell Monzo to smooth out of the next 12 months. Then instead of taking £79 from my account in one go, it will take £6.58 out of my account each month. This would give me the comfort of monthly pricing but instead of paying the £7.99 monthly price.

It’s been a little bug bearer of mine for a while but no big issue, but it could be helpful for others.

What do people think?

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This used to be part of the Spread the Cost feature, but you could use loans instead.

Oh that’s cool but not really had credit in mind.

I would like to spread the cost using my own money. Having to pay interest defeats the purpose.

Thanks

To be clear, this is all about how the cost is represented in Spending right? If so, sounds awesome.

You would still make the payment in full at the start, but it would then it’s effect on budgets etc would be spread out into future months.

@conor Someone’s still got to pay the amount up front though so there’s still lending involved in that

For amazon prime specifically you can already go on their website and change to monthly

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Sounds like you’re basically asking Monzo to provide your with up to a year of Interest free credit on a rolling basis. I don’t see how that would be sustainable.

Why not use a Pot? Make a list of all the subscriptions and expenses you pay once per year. Add up the total amount and divide by 12. Set up a monthly scheduled payment for that amount into the Pot and then when it comes time to pay, remove the money from the Pot.

Alternatively, if you have a good enough credit history, get a credit card with long interest free period (2-3 years) to use for these types of purchases. Pay back the ave monthly cost as card repayments. Once the interest free period is up, cancel the card and get another one.

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If the problem trying to be solved is uneven budgets, then the solution could be implemented by a feature of the budgeting system.

The actual payment would made in full at the time of purchase. One could then flag it as covering say 12 months, and this could be taken into account in the spending screen.

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I don’t think this would work because you might pay £120 for a twelve month subscription, tell you you’ve paid £10 and now you’ve got £110 less in your account than your budget says you can spend

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If that’s true then you don’t explain how it would work.

You talk about taking only parts of the bill out of your account every month. If that’s what you really mean, who pays the rest of the bill on day 1 if you’re only paying one twelfth of it?

How is anything that :monzo: Monzo invents going to be better than you simply saving 1/12th of your subscription every month across a year?

The ‘fix’ to whatever problem you envisage here is easy and already available.

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Perhaps it’s the fact that the money would be set aside and wouldn’t be accessible to spend, so the monthly payments would be just like other direct debits.

I agree that you could just schedule 1/12th of your subscription every month to a bills pot, but this becomes more difficult to see if you have multiple bills since you can’t set up more than one scheduled transfer to a pot or give a nickname to a scheduled transfer. Also if you miss a transfer because there isn’t enough money in your main account when it’s meant to go out you could miss a payment.

TL;DR
If these things were implemented, I think @conor would have all the functionality he needs:

  • Bills pot.
  • Ability to schedule more than one transfer to a pot (with different frequencies).
  • Ability to give nicknames to scheduled pot transfers.
  • Pot transaction history.
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That’s what I do.

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Hello everybody,

Thanks for the feedback on this. It is clear that I have not explained this properly. @lmcm has understood this as I hoped but I will clarify for others.

That is exactly how I envisage a solution working.

I think you have slightly missed the point. The idea is to be able to leverage the annual pricing to get a discount.

I am not asking for credit. I have the funds to pay the entire amount up front but I would like it to be deducted from my main account each month. So in effect I would pay (from my current account), the entire amount once off. So that is one transaction between myself and “Amazon”, using my money.

I would envisage a possible solution (algorithm) being something like this:

  • User makes single transaction for 120 to merchant
  • User selects option to “smooth this payment over 12 months”
  • Monzo will calculate monthly amount: 120/12 = 10
  • Monzo will deposit 11 months worth of cost back into main account (110), from a pot, meaning the current month we have only been deducted the amount equal to one month (10).
  • the next month and subsequent months, Monzo will deduct (10) from main account back into the pot.
  • At the end of the 12 months. The original pot that the funds came from will be replenished and the user will have spread the cost of the transaction over 12 months, making budgeting easier.

This could be really useful for me because I have a number of things that I pay a lump sum for in order to enjoy discount on services rendered on a monthly basis.

This would really help me budget better.

I think implementing the functionality is not difficult. It’s more about how this is presented to the user. With Monzo adding loads of cool features, if not executed correctly I imagine they run the risk of ending up with a spaghetti type log of transactions… obviously they are doing a super job thus far.

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How do you think spending the amount in full first then spreading the cost over the next 12 months on Summary is better than transfering 1/12th of the amount to a pot every month for 12 months before paying in full?

Is this essentially a way of including the price of unexpected costs (eg: a car breaking down) into your normal budget over the rest of the year?

ie: for a £120 unexpected payment smoothes over 3 months, £40 of extra spend is automatically added to your Summary (effectively reducing your budget by £40) for the next 3 months.

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So… a monthly scheduled payment from a pot to main account?

Doesn’t that already exist?

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Well, the cost is paid advance and not arrears, but I guess what you are saying is true if people know 12 months in advance they are going to need to spend x. But it may be unknown. Not in the sense of I have a car, therefore I should set aside funds for unexpected repairs. Unknown in the sense that… Wow, 12 months ago this subscription service didn’t exist, I think I will subscribe but pay the lump sum in order to get a discount.

Yea pretty much, but wouldn’t it be nice if was wrapped up into a simple little feature that did it all for you?

Have any of you guys encountered this issue before?

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I do pay annually instead of monthly where this leads to money saving. I currently use an interest free credit card for this, which effectively smooths the payments. If I didn’t I think I’d probably pay 1/12th of approximate annual expenses into a pot or savings account on a monthly basis to use for such expenses when they come around.

I suppose I’ve never had a desire for a solution that neatly integrates into the Monzo budgeting/categorisation system because I’m yet to find these aspects of Monzo particularly useful.

So where does the money come from?

If you have it saved in a pot, then you’re already doing what you’re asking Monzo to invent (ie. beforehand, save up the amount you need to pay as the lump sum, pay it, the replenish the pot over the next year)

If you don’t have it saved in a pot, in your example you pay 120 and then also get 110 put into your current account? What you’ve described doesn’t make any sense.

Either you want Monzo to sub you the 120 (interest free over the next year) so you get the discount but Monzo doesn’t get anything (?!) or you pay them interest and you’re back to square one (paying more as a consequence of not planning ahead)

If you want the discount, save 1/12th of the annual fee every month for a year (and a little bit more in case it’s a bigger fee)

Monzo doesn’t need to ‘invent’ anything as far as I can see, you just need to plan a year in advance, which coincidentally, would have the desired effect of ‘smoothing’ your budget monthly.

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That’s my feeling. I’ve worked this way for years and there’s nothing I can think of that Monzo can do that would streamline it for me. Maybe I’m missing something, but nit doesn’t feel like it.

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Ah so you do want a loan. I didn’t see that the first time. But borrowing money costs someone, somewhere, something. Go figure.