I have certainly seen a per day rate advertised at least once (which of course made the credit appear extremely cheap). I also clearly stated the rate as hypothetical. Whatever the actual rate is, the principle still holds. And to my knowledge overdraft interest does usually compound daily, though I’m not too sure on that.
The point is that regardless of the precise rate, and regardless even of how often interest compounds, people tend to find it difficult to figure out the cost of their credit if percentages are involved.
That Monzo would be able to make it easier to figure out said cost as @Samuel10 says is also quite clear, I think. As I said: I don’t agree with charging a fixed daily overdraft fee. I was merely explaining why I think you cannot compare a percentage based but ultimately still fixed ATM fee, to compounding overdraft interest on a daily varying balance.
Lloyds Banking Group have a daily fee of 1p per £7 borrowed, which is debited daily and certainly compounds, but hypothetical or not, your examples were all kinds of wrong to the point you were just making up numbers out of thin air, which didn’t really back up anything.
To compound daily the overdraft interest calculated each day would be added to the account each night and then the next day the interest would be calculated on that new higher amount incorporating the charges from the day prior.
With Starling they calculate the amount of interest each day based on the account balance and do not then add that interest to the account balance, therefore the next day interest is not calculated on a compound basis of yesterday’s balance plus the past day’s interest incorporated. Each day’s interest is then added up at the end of each month and then charged a couple of weeks later mid month. So they are not using compound interest.
I may be wrong in the way I think credit works - is the interest not charged on the bill date? I thought it just has a day it charges you because my credit card if I spend 1000 and pay 1000 within the same billing cycle it doesn’t give me a charge. I’ve only ever used the 0% portion of my overdraft also so I’ve not had charges there - does it not work in the same way as a credit card? The only time I’ve used my overdraft was my HSBC one which I believe is 18% or something like that and I was charged pennies for the month
I’ll be honest, when you began comparing the Monzo overdraft to a credit card, I wasn’t sure if you understood that the forms of credit are extremely different.
Purchases on credit cards are counted from the day the transaction hits the account. Once a month you’re sent a statement showing all the transactions to have hit the account in that time period, and given about three weeks to pay the bill.
If you settle the bill in full, with most credit cards you are not charged any interest. If you do not settle the bill in full, you are charged interest on the whole balance from the date of the purchases, which appears on the next statement produced the next week for the preceding month. This continues until you settle the bill in full. If you then don’t spend on the card you’ll have a small amount of trailing interest from the remaining statement period before you have nothing further to pay.
You’ll therefore find yourself paying interest on purchases for as long as you pay less than the full statement balance.
It is nothing like an overdraft, and your assertion that you know spending on your credit card will be cheaper than any other form of credit is doubtful.
To complicate matters there can be multiple interest rates so cash advances will be at a higher rate, regular purchases at a normal rate, balance carried over from a transfer from another card at a lower rate. As well as your total card account balance the separate sub-balances may appear on a end page or in a detail box.
That’s in addition to them capping unarranged overdraft charges to £2/month, if I remember correctly (read this somewhere on their community, can’t remember in which thread though).
Starling was the first UK mobile-only current account when it launched. While challenger banks are more common now, only a few provide current accounts, including Metro and online bank Monzo. Starling received £48m in investment in 2016 and aims to raise another £40m this year to fund a launch into Europe, starting with the Irish Republic. It’s a move Boden is bullish about, even with the uncertainties presented by Brexit. “We’re very ambitious,” she says. She has also forecast that the bank will reach profitability by 2019.
Starling has 180 employees, all based at the bank’s London office, and Boden says she takes pride in creating a diverse and creative working environment. The ratio of men to women on the senior team is currently 60:40. “I’d love it to be 50:50, but we’re not there yet.”
Here’s some feedback for Starling. Make it possible to sign up to your forum without using another service.
I’ve tried with Twitter and GitHub and it doesn’t work. I’m not using Facebook or Google.
