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.
Contents
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.
Overdrafts
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.
It’s been brilliant for me so far. I joined Monzo after doing some research to find the best way of spending money abroad. My old bank would charge me extra fees for using my card, using ATMs and then even give me their own exchange rate which was far poorer than the actual one from Visa/Mastercard. Monzo is a far better alternative as they don’t charge these fees and give you the actual exchange rate i.e. the one you find on Google.
It was also a nice bonus to get a free £5 put into my account for signing up first using a friend’s referral link. If you’re thinking of joining, feel free to use mine and you’ll get it too.
join.monzo.com/r/h3c14a2
Main pros for me with Monzo are:
Savings pots with interest over £1000,
Pots which you can move money out of your main/ current account and set money aside, with savings goals too,
real time spending which comes through as a notification as soon as the payment is processed,
Set budgets where you can monitor commited spending (bills) and other budgets which fall into 12 other categories.
Set your payday and it estimates out how much money you should have left based on scheduled payments and budgets set
You earn £5 upon signing up if using the following code: https://join.monzo.com/r/td6rrhn
I really recommend Monzo.
I think it’s the best current account and use it for all my banking now.
If you are thinking of joining , please use my referral Link.
https://monzo.com/referral?code=ukow78k
Using this link we both will get £5.
Thank you in advance for using my link
I’ve been using monzo for about a year and a half now and I can honestly say, I’ve loved using it.
Initially, I liked the fact that you it could help you budget, as that is something I have struggled with in the past.
The app itself is easy to use and navigate around and allows you to easily see where and what your spending your money on.
Their customer service is also very good.
Over the last few months I’ve also been using their current account. Essentially it’s the same, but you can get your salary paid into it and set up direct debits.
I intended on using these features but unfortunately I was made redundant at the beginning of the month so I have nothing to get paid into my account.
Overall tho, over the last 18 months I’ve seen a decline in how much I use my Barclays account (including my Bpay contactless wristband)
Hi
It took me 2 weeks to receive the card. They have full control over your money. They do whatever they want with the money you have on your account. They have closed and cancelled my account without any reason or even letting me know in advance. Their customer service is poor! I had money transfered to the account and they had transfered all the money back; that left me in massive trouble. And all these without warning or any information!
Would not recomment monzo to anyone!!!!!!!
They ask for all you bank details before telling you that you need photo ID. It is hit and miss where you can use it and it will be accepted. It was quicker opening a Nationwide current account on line (10 mins) I am told they will be phasing these accounts by next year anyway!
Hi how long does it take for the Monzo card to arrive in the post once you have topped the waiting que on the App.
I got my card in about three working days I think, though I can’t guarantee it!
We have been using mono for over a year now and absolutely love it! We have used it abroad several times and never had any issues and always got the best rates!
I love the Monzo card. Global citizen here and I find myself ordering things online in different currencies wherever I go as well as purchasing services/essentials/gifts for my global family quite often. Monzo has saved me an enormous amount of money! I can’t believe it. I used to loose so much in transaction fees or physical currency exchange or have to keep up with all my bank accounts all over the world. Now I don’t bat an eyelid. Just used Monzo in UK, Bali, Marrakech, Bangladesh, Singapore and the USA and it was great! Can’t wait for the current account and a real card (not pre-paid) as I could not add Monzo to my paypal or hotels don’t accept it as a ‘deposit’ credit card when checking in. Cards like Monzo are the future. High street banks better pay attention… all those transaction fees are not going to help you one bit with the youth that now live and work all over the world. I think its only available in the UK since family and friends in the US could not sign up for it using a US address. I’ve recommended it to others who have signed up and are raving about how much we are now saving 🙂 Monzo is definitely for the global citizen!
Yeah my colleague at work is often in France and Belgium visiting family so it makes his life so much easier! Interesting to hear about the hotels not accepting it. I had written a section about this (and car hire) but it seemed to work for some people so I removed it before publishing.
Please check your facts before posting.
qt: But when Monzo moves to a full current account this feature won’t exist!
(under ‘It can help you stick to budget’
Top ups will remain in place after current account launch. Here’s the source: https://community.monzo.com/t/top-up-amount-box/7660/11
qt: If you can’t use your phone, you can transfer from your other bank’s online service. The info you need is all stored on the app, you don’t get your own sort code or account number, though you can find it on the Monzo website. It’s worth storing these somewhere for easu access.
9 digit code and account details are NOT in the Android app.
Account details are in iOS app.
9 digit code is on the card. Account info can be found in few places. You can ‘access’ this information probably under 60s, how is that a downside in a ‘app only’ aspect?
This paragraph is very confusing for Android users and makes no sense. 🙂
And you weirdly presented the top-up aspect. Once Monzo has current accounts, you can send salary there, so you won’t need to top-up.
You can also set up automated bank transfers with pocket money, while the app provides good overview of the spending.
If you don’t want to put salary on Monzo, then yeah, you’ll need to send money in SOME way, that’s just stating the fact.
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Overall, I feel like few ‘downsides’ in this article were forcibly put there to make an impression of professional and critical review. Too bad they don’t make any sense.
In reality, it just exposes shallowness of this review. Monzo isn’t perfect, there are some problems, or aspects that could be problem for some people. Too bad that the author focused on describing 5 most well-known things about Monzo.
Hi M, this review is for people who don’t have Monzo or even heard of it (which is a lot of people) so its focus is on the basic things. Really interested to hear about the other things you’ve picked up as a longer term user though. What’s not worked for you?
What, M, don’t state you’re quoting his article (assuming that’s what ‘qt’ means) and then write your own paraphrase of his words! That’s far more misleading than even you try to make the author out to be!
In any case, in my opinion the article is written informatively and doesn’t just ‘make an impression’ of being balanced. But that’s just my opinion; you’re entitled to yours of course but don’t accuse someone of being incompetent and then be misleading yourself.
🙂