Student Overdraft Facility - No Charge

Also, where precisely does that line get drawn?

I studied a video games development degree, which I have heard a lot of people mock (often with the misconception that we just play a bunch of games on that degree). However, we actually were learning some fairly complex programming and maths.

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Usually within their own parameters - so each person who moans about “Mickey Mouse degrees” has a different threshold and can only really name STEM subjects that should be studied - despite that fact that when the world’s oldest universities were established most students studied “fluffy” degrees like Philosophy, Ethics, Religion, Theology and Literature and not the same subjects they make out are the only one’s worthy of investment.

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Let me start off by saying I don’t believe Monzo should offer 0% Overdrafts at the moment, it would just be silly from a business perspective when theyre yet to make profit.

Why do legacy banks offer 0% overdraft fees to students?

  • In the longterm it makes the customer happy and theyre more likely to be on a higher wage than the normal customer down the line due to being on a graduate salary - leading to potential mortgages/ business loans? in the futute etc.

  • Potential income from fees if/when the overdraft needs repaid after agreed date

Why would Monzo not offer 0% overdraft fees to students?

  • Potentially putting person into debt they cant handle? I dont think this is any different than a person taking one of the monzo personal loans to be repaid over 12 months for example. debt is debt

  • What makes monzo great is how they spell out terms and conditions and potential charges/ consequences. If they do this for a 0% overdraft I dont think many people can complain if they take an overdraft whilst being a student and then have consequences from failing to live up their side

Monzo is huge in the student community, I worked all through my undergrad and wouldn’t still have been able to cope with the prices of living in Brighton without an overdraft. I’m currently doing a PhD so still have my overdraft, I would love to fully switch over and pay this off slowly over the next 4 years. Please introduce a student overdraft!

I agree with a lot of what you’ve said, and I agree that at this stage Monzo shouldn’t offer an interest free overdraft. However it is worth noting that in the future, maybe 5-10 years down the line, this may be a sticking point.

I study Physics at St Andrews, and like most universities with a good reputation it is in a very expensive place to live. Students who come from very low income households would not even be able to pay for their accommodation costs with their maximum loan.

Asking for money from family sometimes isn’t an option for a lot of students, and whilst I agree sometimes overdrafts can be used recklessly, a lot of the time it’s mainly to cover short term but large payments (e.g. accommodation payment of £1000 when student loan doesn’t come in for a couple of weeks).

Anyway this is all a bit unrelated to Monzo. My main point is that at some point in the future, not offering an interest free overdraft will be a considerable barrier for most students to convert to Monzo - many students are unaware that their legacy bank will likely let them use their overdraft even with a Monzo account.

At some point Monzo will probably have to offer an interest free overdraft but chances are that point is at least 5+ years down the line.

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Lets be perfectly honest the government’s student loan (as there is no longer any grant) just isn’t enough in the main to provide a student with the necessary money to survive over the three years. Yes for some it may be and for others who get jobs etc they can afford it - but if the idea is to increasingly allow social mobility and get people to university (I was the first in my whole family to go) then this is a real issue.

Therefore, the big banks step in, those who can afford to provide 0% interest on £1,500/£2,000/£3,000 overdrafts on three/four year time limits (these are usually caveated and require some of the student loan to be paid in every semester) however what they also do is tie you in post-graduation. I think previously banks played it that once you graduate it turned into a rather messy situation for the student needing to repay - however now there are post-graduate accounts that taper the amount of 0% interest overdraft. What this does though is keep that student with the Bank until they are +3 years graduated and likely to be in a well paying job and looking to acquire credit/ save for a house.

However the issue remains is that these large banks can afford to provide thousands and thousands and thousands of students a large overdraft because they have that money coming in from elsewhere - currently Monzo just can’t provide that and that is really the issue with being able to do it. I agree it is a good way of bringing in a customer base and with the tapering keep them with the provider - but it is for a large cost and possible risk.

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I agree that student overdrafts are a necessary facility, but I think there is a severe lack of education about what you can and can’t do with it and how it affects you and your credit rating in the future (according to Santander it does). If monzo were to ever offer anything like this it would have to continue to educate people on how they’re money works.

I know I have mentioned this before however, I am starting this new thread as I really want the community to help get the attention of Monzo in discussing this possibility. I have been asking around my University and others and the one thing that I keep hearing is “I would love to go Full Monzo, but I rely on my interest free overdraft at my traditional bank”. It’s really something I think Monzo should take seriously to gain a competitive advantage over other Fintech banks and I personally would benefit highly from having this available to myself. I rely on my overdraft to make unexpected payments before pay - day and knowing that I will be charged for this by Monzo everyday makes me not want to use the facility. However having the interest freeoverdraft facility for students such as myself takes that added stress away.

If you also feel, like me that this would be a useful and you are also a student at University, please show your interest in this thread!

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Big banks can afford to offer this, I very much doubt Monzo can. I also feel it could cause further stress down the line, when you have to get out of your overdraft or face charges.

Best thing in my mind is have an overdraft in case you need it, but be charged for it so you don’t stay in it for months on end as it’s ‘free money’

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What I want to know is do you think this would be a useful step for Monzo to take! Whether that be in the near future or further down the line doesn’t bother me, I just want the opinions of people on this forum who are university students who feel they would benefit from this and in turn make them more likely to switch to Monzo as their main banking provider.

I definitely agree, this would be a useful feature but yeah it would be difficult to offer something similar and competitive to the other banks offerings e.g Santanders Student Account has a fee free and interest free overdraft of £1500. I don’t see this being anything monzo can do in the foreseeable future, especially as it would be a feature that only benefits one demographic

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You are correct however correct me if I am wrong it seems that university students aged from 18-25 are probably Monzo’s biggest demographic and therefore I feel that their interests should be heard and thus this is why I wanted to spark interest from this thread.

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It is all well and good their interests being heard, but from a business perspective it is bad business.

The majority of student accounts require a certain amount of money to be put in (I know my Santander account did) furthermore, whilst useful they can also be highly predatory with people pulling that overdraft on for quite a while after graduation (granted still at 0% for a while but at some point that bubble bursts).

There is nothing stopping a student from having their maintenance loan paid into a legacy which offers the overdraft and then moving discretionary spend into Monzo.

I just see it as bad business for Monzo who will more likely than not be hurt by providing large sums of overdraft (my student overdraft was £2,000 I think the max you can get with Monzo is £1,000?) that may not be paid back for years.

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yeah that’s true, I agree we should express interest in it to put the idea on Monzo’s radar but there’s a reason the other small fintech banks haven’t done this. The reason being a fee free overdraft to some of their customers, which as you said consists of a large student group would be very expensive if they were to attempt to be competitive with the main banks. Despite this I would also like this so if monzo could manage it, I’d be happy for sure

Yes this is what I do, and it works fine for me, I have the overdraft available if I desperately need it but I still use my monzo as my main current account in terms of spending.

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Aside from needing a lot of capital to lend out for a long period, I think this would require quite a significant change from how Monzo currently seems to consider lending.

Giving £1500 to 18 year olds with barely any banking history doesn’t seem to fit into their idea of conservative lending, so I’d be very surprised to see them offer something like this anytime soon.

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What about if they only offered it to students who applied for it and proved financially that they really needed it, do you think this would work?

I’m not denying its usefulness, especially if used responsibly - I used and still use to a small extent my student overdraft.

However, I don’t think it is an imperative feature and one that would arguably hurt Monzo more than the number of new users it would help acquire.

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Yeah I agree, like while we might all have used/use our overdrafts carefully I know so many people who maxed their overdraft like straight away purely because they had it. In this sense it’s a blessing and a curse. Most 18 year olds can’t help but spend when it’s put in front of them, whereas if an overdraft has a fee people are less likely to use it. Ultimately my point is most students just shouldn’t use overdrafts, for most people I know it just created the illusion of having more money and they buried themselves. Due the nature of Student Loans being in 3 instalments my overdraft definitely helps me cashflow-wise but I am careful

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In my personal opinion, with the extent living costs for students, both accommodation and living expenses and what you actually receive in terms of a “maintenance loan” - every student would likely apply and be able to prove they needed it. Naturally some exceptions will exist.

For me the maths just doesn’t work out. (I think this is correct it is a Friday so could be off).

If you gave say 10,000 overdrafts (0.5% of Monzo’s customer base) and each has an overdraft of £2,000

Over 1 year that is £2 million “loaned out” at 0% - over a year at BoE base that would net Monzo £150,000 in interest. Not to mention that a student’s course is likely to be three years. So that is £450,000 (if on basic interest and BoE rate doesn’t change) lost with no guarantee that the initial £2 million lent will be returned and Monzo won’t gain anything from it.

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