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Should you move to app-based bank Monzo?

There’s quite a cult around Monzo, with tech-savvy customers raving about the featured packed app and coral coloured card. And it’s now spreading outside this initial group into the mainstream. The latest bank switching stats show the bank is gaining new customers faster than most others – only HSBC and Nationwide grew more in the last quarter.

But as I reported a few weeks ago, the bank is struggling to make ends meet, and now its added new charges and restrictions for account holders.

So I thought it was time to revisit my review from a few years ago to reflect the changes and help you decide whether you should make the move.

What is Monzo?

Monzo is one of a growing number of “smart” banks that don’t have branches or even call centres. Instead it is operated all through an app. The idea is that everything has been developed from scratch to work in a digital age, unlike the other banks who’ve had to adapt and migrate existing systems – which doesn’t always work (hello TSB).

It started life as a prepaid card, but moved over to a full current account in 2018. It now works just like any other account. You get a Mastercard debit card, and you can download bank statements if needed.

How much does Monzo cost?

The standard Monzo account is free. The new Monzo Plus costs £5 a month, and there’s a full review here.

The new Monzo fees

From 31st October 2020 there will be some new charges for free Monzo customers.

Cash withdrawal fees

First up there will be a new 3% charge on cash withdrawals above £250 every 30 days in the UK and European Economic Area. Previously there had been a £200 free limit for overseas cash withdrawals, and that will remain for countries outside of Europe.

This might sound quite harsh, but actually I don’t think it’ll have much impact (On its blog, Monzo says 79% of customers wouldn’t have paid the fees based on the last year).

The main reason is most Monzo customers don’t use cash, so a £250 limit will be more than enough.

Plus people who are using Monzo as their main bank account won’t be hit by the fee. This is defined as paying in at least £500 each 35 days and having one active direct debit. This exemption also applies to anyone receiving DWP payments each month or a student loan payment every eight months.

And if you don’t use your Monzo account as your main account, then you can just use your other account to take out cash.

Card replacement fees

There’s a new £5 charge for replacement debit cards, unless your card has been stolen, expired or compromised by fraud. Again those defined as using Monzo as their main account are exempt and can get two free replacements a year.

Monzo’s features

A lot of the features in the app have been quite innovative in trying to help you manage your money. Of course with anything new the other banks are trying to emulate them.

Here’s my take on some of Monzo’s key features:

The app

I’ve got a lot of different accounts at different banks so I’ve been able to check out and use each of their apps. I think the Monzo one is the easiest to use and navigate.

Tracking your spending

The app puts all your spending into categories so you can see at a glance where the money is going. You can set limits for each category, say eating out, so you know when you’re close to busting your budget.

There’s also the option to set your payday and detail “committed spending”, essentially those direct debits and standing orders which you know are going to come. This gives you an estimate of how much money you really have to spend until you next get paid.

You can also take a snap of your receipt and attach it to the transaction or add notes about the purchase.

Budgeting help

One of the early selling points for Monzo were the budgeting features. And this still stands today – in fact I think it’s one of the best reasons to consider an account.

A classic budgeting method is the “jam jar” or envelope system where you physically divide your money for different expenses, eg bills or food. Well, you can do that digitally with Monzo via a feature called Pots.

You can set them up and move money as you want, or have them automated so your salary is divided among them on payday. You can even pay your bills from a set pot.

There are also savings pots paying interest, but the rates can be beaten elsewhere.

Instant updates

As soon as you use the card you’ll get a notification on your phone as to the amount. You’ll see it in the app too – unlike some banks where it can take a while to come through. This is particularly handy abroad as you’ll see exactly what you’ve spent.

Automated savings

I really like this feature. Every time you make a purchase you can choose to let Monzo round up the amount. So say you spend £13.42. That will get rounded up to £14, with 58p moving across to one of your savings pots. It’s a nice way to make sure you don’t forget to put some extra cash aside. And even though it’s a small amount, it can quickly add up.

You can also use Monzo to automate the 1p savings challenge.

Spending abroad

You can spend on your card overseas and not get charged any fees. This was the main motivation for me to get the card back in 2017 when all spending and withdrawals were fee-free.

Since 2018 there’s been a limit for taking out cash, meaning there’s a 3% charge on anything over £200 in a 30-day period.

This limit means my top-pick for overseas spending is Starling Bank. However, if you don’t think you’re ever likely to take out more than £200 in cash or if this isn’t your primary concern when choosing a bank, then Monzo is still a decent option.

Security features

Monzo was one of the first banks to let you check your PIN on the app – though many more are doing this now. You can’t change it in the app though – you still need to do that at an ATM.

Another feature that other banks have copied is the ability to freeze your card if you think it’s been lost.

You can also see your debit card number via the app. It’s hidden but can be revealed with your PIN. This is handy if you don’t have your card on you but need to make an online transaction. 

Gambling block

Though this can be turned on and off, it’s a good extra to have if you are someone who struggles with gambling.


Though not great, Monzo overdrafts can be cheaper than most other banks now they all charge around 40% interest. Depending on your credit rating you’ll get charged 19%, 29% or 39%.

Cash restrictions

As well as the new charges for taking cash out, you’ll also have to pay to deposit cash. It’s £1 each time using a PayPoint location. There are also limits on how much you can pay in each month and year.

My verdict

It’s good, though I’ll never understand the almost cultish fandom I’ve seen from people I know with a Monzo card. 

The budgeting features are really good, and I do think they can help you keep track of your spending. I really like the card management features too – such as revealing the PIN and debit card number. But they aren’t essential.

And though the overseas spending feature is great, the limit on cash withdrawals means there are better options. In fact, if you’re thinking of changing bank then I’d say you’re better off taking advantage of the offers available from other banks.

So I’d really recommend it to anyone who needs help with their budgeting. However I wouldn’t make the move to use it as your main account.

The aforementioned financial worries shouldn’t be an issue right now but they are worth keeping at the back of your mind.

Plus since the primary way to manage Monzo is via the app, if your phone battery dies, you lose your phone or there’s a technical issue with the app then you’re pretty much stuck! There is a telephone help desk, but there are no bank branches to visit or websites to log in to. I wouldn’t rely on Monzo as my only bank. 

And of course other banks provide you with things like cashback on bills or high-interest rates – all worth taking advantage of.

However, if you’re happy to have more than one account then you could get the best of both worlds as use a standard Monzo account for your everyday spending, with your savings or bill payments sitting with a different bank.

I’d give it a go. You can always use it as a switching account if you don’t like it!

How to get a Monzo card

You simply download the app and apply.

> Apply for a Monzo card