The Overdrafts Pricing

I never used overdraft for purchases… just to cover huge Direct Debits - Mortgage and quarterly energy bills… not enough money sometimes especially in winter times when energy bills are around £400-£500.
For example I will borrow £30 for 4-5 days to cover Direct Debits… So I will owe Monzo £2-£2.50 overdraft charges… In this case it is very expensive. Other banks will charge nothing for this or few pennies…

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I think we’re coming from different perspectives here. I genuinely don’t care about paying £2-£2.50 in charges after payday, regardless of whether I could pay less if I used a different bank. The convenience & other benefits of Monzo outweigh that cost for me & it’s not going to have a significant impact on my finances. Obviously the benefits don’t outweigh the cost for you. We’ll have to wait & see which viewpoint is more common among Monzo users & no doubt they will (or won’t) adjust their pricing accordingly.

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I think it’s great we have so many, mainly constructive, conversations about overdrafts. But it really confuses me how far they go into who’s right or wrong with how they should work.

Monzo have set out their initial offering for overdrafts and currently only offering it to a limited number of users. They are being very transparent with it and have no near term plans to change it. So it’s now for users to decide if they want to take it up if it is made available to them.

No one is forcing People to sign up to Monzo. And no one will force people to take an overdraft with Monzo. You simply look at what is available in the market and make your own choice. :+1:t2:

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That’s a really odd theoretical.
Spending all available money + £20.01 on day 1
Leaving it for the month. £15.50

Here’s something a bit more realistic and just as OMG?
Use your overdraft 4 days a month? That’s £24 a year.
Compared to traditional APR
15%, £200, 4 days a month = £3.95

But - one adequately covers the bank’s fee for managing accounts.

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This is what I mean though. It is hypothetical until people have it an start using it. It is a completely optional feature and users don’t have to take it, if they do request one they know exactly what they are in for. As for transparency I am not sure how they could be more so.

Personally I don’t think it is the best deal so please don’t think I am trying to defend Monzo just because. I would, like others, want a larger free buffer. A tiered fee depending on overdraft amount. But this is currently the only revenue stream for Monzo and I want them to be around long enough to innovate and hopefully reduce user fees in future.

For for a first go, sure i am happy with it. Could be much worse and let’s see how it improves.

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I’ll just leave you with this -

From the CMA’s 2015 retail banking financial performance report.

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Over how many days per month @alexs?

Could you break down the maths for that please? That doesn’t sound right to me.

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I’m not 100% sure but we do know that

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Thinkmoney’s survey found that 21 per cent of respondents admitted to being in their overdraft less than a week after payday, while 13 per cent slipped into it just a day after getting paid.

So not so odd. Slightly depressing.
People need to transfer overdraft away to something more manageable and separated once they have an income again.
cough Loans or credit cards would be better than an overdraft, but people see cheap. cough
Payday loans are far too short - 1 to 3 periods from the first result on Google.

If someone can put down an alternative that would be financially viable for Monzo I’m sure they’d look at it.
We don’t know the exact running costs of Monzo. We have an idea but not the true figures.

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There’s no question about that.

So I guess we’ll have to wait & see whether users care about that % or this one

or not at all..tbc :slight_smile:

I mean that if users can see the £’s & pence cost of borrowing the money for a short time & value the other benefits that Monzo offer, perhaps they’ll still use Monzo’s overdrafts. That seems to be what Monzo are assuming so we’ll have to wait & see whether that prediction turns out to be correct or not.

We know that Monzo’s not going to win any (or many) price comparisons but (hopefully) that’s not the point.

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I guess we have a different definition of fair :slight_smile: after all, it’s subjective so there are lots of opinions about what it means. But to sum up, this pricing doesn’t concern me, for the reasons I’ve explained in this thread.

Ultimately this comes down to supply & demand, if this pricing is reasonable then users will borrow from Monzo, if it’s not then they’ll have to change their pricing.

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As I say we can continue debating the value of a Monzo overdraft vs others but I think we are missing a more important conversation.

Are some people wanting overdrafts at Monzo so they can move debt over from their existing banks?

I am linking all my comments above to a new Monzo user that may initially have no overdraft functionality and starting/continuing with a positive balance. This may mean leaving a negative overdraft/balance where it is and planning a way to eliminate it (small monthly reductions to £0 or other lending means).

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If people do CASS in the future and have an overdraft then it’ll be a big consideration for them I would have thought.

Barclays, Santander, TSB if under 12 days, Lloyd’s & Halifax if over £350

For a non-apr based overdraft, it’s competitive.

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Why does it often boil down to “If you don’t like it take a hike?”

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It doesn’t, Monzo will see take user’s feedback on board, as well as checking whether people / how people are using the overdrafts & adjust the pricing in response.

Not at all (I wouldn’t even say my wording is referring to anything like that). I’m saying users don’t have to take up the overdraft if the don’t want to.

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