A Monzo bank account helps you visualise your money, making controlling your personal budget simple and easy. Monzo, along with a few others, is challenging the traditional banking services by putting banking tools and services directly on your mobile phone.
We’re big fans and use we Monzo as an integral part of our Financial Fitness Guide. This article will help you decide if Monzo is right for you. We’ll detail what all the fuss is about and some clever tricks Monzo gives you over your traditional bank account.
What is Monzo bank?
Monzo is one of the new bread of digital challenger banks. It has no physical bank locations, you simply manage your account through a mobile app.
Promising a bank that works with you, for you, its tagline is “banking made easy“. Monzo has no physical banks and you do everything from your mobile phone.
Now boasting 4.2 million account holders, Monzo was launched in 2015. For comparison Nationwide, the UK’s largest current account holder has around 15 million members. Monzo may have been a niche player historically but they’ve now graduated to the big boys league.
The new-comer proved its pedigree by winning the Best Banking App in the British Banking Awards 2019 & 2020. Interestingly, Best British Bank and Current Account went to Starling Bank, Monzo’s biggest competitor (we compare the two later).
Why is Monzo bank different?
The younger, digital generation was at the forefront of the developer’s minds when building the app. They’ve not had to accommodate legacy banking systems that were developed in the 80s and they do not carry the old guard banking mindset.
That being said, fundamentally Monzo is very much like every other bank account. You put money in and you take money out. The difference is in how Monzo organises your money, allows you to budget and the fantastic mobile app.
Monzo Benefits And Features
- NEW! Get paid a day early – Monzo put your salary in the day before payday
- NEW! Salary Sorter – Sort money between savings, bills and spending easily
- NEW! Bills Pots – Put money aside for bills so you don’t accidentally spend it
- Instant Mobile Notifications – When you spend or when you receive money
- Savings Pots – Earn up to 0.74% AER interest
- Easy Budgeting – Set budgets against spending categories to ensure you stick to your desired budget
- Overdraft – Up to £3,000
- Loans – Easy to access loans via the app
- Split Bills – easily split costs with friends
- Shared Tabs – Set up a shared tab between friends, add transactions and settle up later
- Apple Pay
- Google Pay
- Joint Accounts
- Business Accounts
Monzo Bank Reviews
Independent ratings and reviews site Trustpilot rates Monzo Bank as ‘excellent’. Nearly 8,000 people have left a review leaving Monzo with a great score of 4.5 out of 5 stars. While Monzo scored highly, Starling Bank narrowly beat them on the table below by receiving more reviews.
Using Monzo Abroad Features
On top of the standard features, a Monzo account gives you some great features when using your card for travel.
- No need to tell Monzo you are travelling – simply check-in and go!
- Free Overseas Spending – just pay the Mastercard exchange rate, no additional fees or charges
- Free Overseas Cash Withdrawals – up to £200 every 30 days in the EEA
- Travel Reports – get the exchange rate when you land and how much you spent when you return
Budgeting with Monzo
This is where Monzo really jumps out. Every time there is a transaction on your Monzo account you receive a notification on your mobile. The notification automatically categorises your spending allowing you to get an instant financial snapshot of how you have spent your money over the month.
You can set budgets and limits around how much you spend and on what. This means you have a clearer view of your financial habits. Spreadsheet budgets are great but this easily shows you what you have actually been spending on directly within the app.
These tools are great for helping you to understand your spending habits and to plan accordingly each month. If used correctly this can help you budget, stay out of debt and plan for an emergency.
Saving with Monzo
Monzo allows you to put cash into separate savings or ‘money pots’. Pots are a simple way to put money aside and set it apart from your spending money. You can create multiple pots for different purposes and see an overview in your Account tab.
Money in a ‘pot’ is set aside and won’t be available as part of your account balance, even though it’s technically in the same account. You can move money back from pots into your main account if required.
You can set images against each savings pot so you can visualise what you plan to use that money for.
If you want to earn interest on your “pots” you have a choice of Easy Access Savings Pots, Eash Access Cash ISA Pot or a Fixed Savings Pot.
Monzo used to offer a Savings Pot backed by Investec that paid 1% interest. The number of those pots has now been filled due to popular demand, however, and replaced by offerings from different providers at similar interest rates.
The “Roundup Transactions” feature allows you to round up every transaction to the nearest pound and dump the difference into a specified pot. This gives you the option to save a little bit each day without really feeling like you’re saving. You can only use the roundup feature on one pot.
Personally, we have found these ‘pots’ an incredibly powerful and motivating way of saving, particularly when you upload an image of the thing you are saving for and can see you’re 90% there.
Click here for Monzo’s latest blog post on Pots.
Monzo Easy Access Savings Accounts
In addition to the standard ‘pots’, Monzo also offers ‘pots’ which pay interest on savings. These are savings accounts that usually provide competitive interest rates but they won’t compete with the best-buys from what we have seen. You can open a savings pot with just £10, making these accessible to pretty much everyone.
Be aware though that Monzo savings products are typically provided by third parties and can change from time to time.
Monzo also offers fixed-term savings pots. This means you will have to lock away your money for 3 to 12 months. These require a minimum of £500, more on these below.
Looking for ways to save money – check out this article on 9 ways to save money fast.
Monzo Flexible ISA
UPDATE: Monzo is no longer currently offering ISAs. However, you can click the ‘Let me know’ button so you get a notification once they are available again. This is typical for Monzo as ISAs are filled by customer demand.
The Monzo Flexible ISA Savings Pot comes in the form of a Cash ISA. The ISA has all the regular rules that apply, such as only being able to open one Cash ISA per year and that you can only pay into one ISA of each type per year. If you have already paid into one or opened a new Cash ISA this year then you will have to wait.
To learn more about the rules behind holding multiple ISAs check out our complete ISA Guide.
Monzo has partnered with other financial institutions to provide Cash ISAs so these are carefully picked products by Monzo. Offerings include products from Investec, OakNorth, Shawbrook and Paragon. Your money is protected up to £85,000, as the partners Monzo uses are regulated by the FSCS.
One point to note is that the money put in the saving accounts ‘pots’ is protected by the third party, so if you also have a separate account with them, then both of these accounts will count towards your £85,000 protection. That is to say, you will only be protected for the first £85,000 across both accounts with this other institution.
We have seen in the past that these ISAs offer more competitive rates by going directly to the underlying provider rather than via Monzo, so if you want the absolute best returns then check out the provider’s website and the best buy tables. The benefit of having a Cash ISA with Monzo is that all your accounts are in one place, and you pay for that convenience.
At the moment there is no way to transfer your existing ISA to Monzo.
Monzo Fixed Savings Pots
Fixed Savings Pots require you to deposit a minimum of £500 and leave it for 3 to 12 months. You will not be allowed to add or withdraw your cash during your selected term. Your reward for using the fixed savings pot will be a guaranteed interest rate, which at the time of writing is:
- 3 Months = 0.51%
- 6 Months = 0.54%
- 12 Months = 0.74%
The Fixed-Savings Pots are backed by a bank called OakNorth. However, Monzo does use other banks so don’t be surprised if these differ. Monzo usually partners with other financial institutions to provide these bolt-ons.
If you don’t want to lock up your money and you don’t mind your savings being outside of your Monzo app, then why not consider Marcus. Another digital-only bank (though part of Goldman Sachs), Marcus currently offers a savings account that pays 1.05% for the first year and allows you to withdraw at any time.
If you don’t have £500 to save then you can use a normal pot or an Easy Access Savings Pot until you reach the minimum £500 requirement. While you might feel it’s important to earn interest, remember that 1% interest on £500 is only £5 per year! Cut out just one trip to Starbucks a year and you will have achieved the same result.
If you want a better rate on your savings, you may want to think about investing. It’s probably easier than you think. Check out our beginner’s guide to help you decide if investing is for you and to get started easily.
Using Monzo bank
Monzo can be used like any other bank account. You get a contactless card, it works with Apple and Google Pay, you can transfer money easily in and out and it can handle standing orders and direct debits.
Furthermore, Monzo allows you to easily transfer money between known contacts in a similar way to WhatsApp. Monzo looks at your phone contacts and checks if they are also using Monzo. If they are then there is no need to exchange bank details, just send the money via their image which shows in the transfer section of the app. Nice.
A further enhancement to this is the ability to pay contacts near you. You can use Bluetooth to transfer money to other Monzo users in close proximity.
To get the most out of Monzo bank account you really should use the budgeting tools to manage your money and assess what your spending habits are. Also, if your friends are using Monzo, it makes splitting bills and minor payments really easy. However, if you have no interest in this then really it’s just a new hot-pink card!
Using your Monzo card abroad
You can spend with your Monzo card anywhere in the world for free. Monzo won’t add any fees to the exchange rate (like high street banks) and you don’t need to tell them in advance. Monzo pass the Mastercards exchange rate directly to its customers.
Also, you can withdraw up to £200 from foreign cash points every 30 days, though after this there is a 3% charge.
Lastly, when you land in a new country, the mobile app will send you an alert to advise you of the current exchange rate. Furthermore, even when you spend on this new country, your transactions will be categorised and you’ll be able to see a summary when you get back.
These are the features that traditional banks have not even thought of!
How safe is my money?
Unlike many other challenger ‘banks’, Monzo actually has a banking licence, which it received in April 2017. This means is controlled and regulated just like any other financial institution in the UK. Monzo is authorised by the Prudential Regulation Authority (PRA) and regulated by the PRA and the Financial Conduct Authority (FCA).
Furthermore, it means that up to £85,000 of your money is fully protected by the Financial Services Compensation Scheme (FSCS) and guaranteed by the British Government. The FSCS has a specific Monzo page detailing its protection (which it has this for most big banks).
Should I go Full Monzo?
Full Monzo is when Monzo replaces your main bank account. It’s a term all the cool kids use…well, maybe not. It basically means Monzo is your primary account for receiving your salary and spending from. Doing the “full switch” would ensure you get the maximum benefit of all the Monzo features, however, this might not be right for everyone.
A second option, and our prefered, is to transfer a monthly or weekly spending allowance to Monzo and use this for any casual spending during the month. This way you set a fixed amount of allowed spending and you can still see where your money is going and how much you have left. It also means you can’t spend the rent money, by ensuring your bills are protected in your primary account via a ‘traditional’ bank.
Monzo plots out how your spending is going and shows where you are vs your budget. A green budgeting chart shows your spending is under or inline with your expectations. Red, of course, means you’re spending too much and spending at this rate means your money is likely to run out before the end of the month.
Unsure how to use Monzo? Try opening an account and testing the second option with a plan to go ‘FullMonzo’ in future. This way you can get a better idea if Monzo is suitable for you. It’s also free, so there is no risk. The choice is yours.
Opening a Monzo account is free and easy. Open an account here. Your card should arrive in a few days.
Monzo Plus – Not Currently Available
This value-added service from Monzo is no longer available. We still don’t know what this will look like. Below is what the service used to look like.
Monzo started offering paid account services in April 2019. It costs £3 per month and the features were:
- Exclusive Monzo Plus Card – choose your colour from Hot Coral, Midnight Sky or Lagoon Blue
- Custom Monzo.me username – a personalised link when you request money from friends
- Access to exclusive events – meet the Monzo team and participate in community events
Travel Insurance (+£4 per month) and Travel Money (+£3 per month) which allows you to withdraw extra cash abroad are both additional features that can be added.
The Monzo Plus features don’t really compare to the classic high street bank accounts yet. However, Monzo is working on improving this and promising that they will add more soon.
Monzo energy switch
According to Monzo, over 50% of people in the UK pay too much for their energy. Monzo wants to help lower this number and make getting a better deal on your energy a much easier process.
Monzo has partnered with OVO Energy and Octopus Energy, both of which are highly rated providers. If you switch to Octopus Energy with Monzo you will get a £40 credit on your account and if you want a little bit more, why not use our link and get £50!
Octopus Energy Review: Great value green energy (plus £50 free)
There is a simple process to follow that you can get to from your profile page under “Monzo energy switch service”. After you answer a few questions you get a quote where you select the best-fit tariff. After that, Monzo will take care of everything else. If you are still in contract with your current provider, you can enter the end date and Monzo will even switch you then.
Monzo says that these suppliers might not be the cheapest, however, they offer competitive rates combined with top-level customer service.
While this might make switching easy and save you money, reviewing your energy bills once a year should be a standard task for any household and you should never be on a standard tariff. If you struggle to find the time then this could help, but doing a review of the market yourself may be even cheaper.
Monzo doesn’t have high street banks so you can’t pop in and talk to someone about your account. There is a UK freephone telephone number, email address and chat built into the app though, so don’t worry.
- Customer support: 0800 802 1281 (020 3872 0620)
- Chat: in the app under “Help”
- Email: [email protected]
Our call was picked up within 10 seconds when we tested by calling Monzo’s support number. Very impressive. However, we have not been able to test the quality of support as we have never had a need to call, which is probably a good thing anyway.
Fees and Costs
Monzo bank doesn’t charge any fees for day-to-day banking. Payments in the UK, cash withdrawals in the UK and payments abroad are all free.
Furthermore, withdrawals from ‘fee-free’ ATMs in the European Economic Area (EEA) are also free. Monzo allows you to withdraw up to £200/month outside the EEA for free every 30 days, after which a 3% fee is charged. You can still make payments in shops, restaurants and online for free though, even when abroad.
Monzo – Get Paid Early
If you pay your salary directly into your Monzo account (#FullMonzo) you can get access to your cash slightly earlier than when it actually lands in your account. Tell me more, I hear you say……
- Your salary needs to be paid by BACS (ask your employer accounts team if you are unsure)
- You get access to the money at 4pm rather than midnight – so only a few hours early in reality
- You don’t need to do anything. The Monzo app will notify you when your salary is ready
This feature has grabbed a lot of headlines and is yet another service that Monzo has introduced to shake up the old standards. Getting your money early is great but not having enough money to last until the end of the month is a problem. This gets your cash 8 hours early, but it won’t make it last longer!
If you are struggling to make your money last until the end of the month our Financial Fitness Guide has been designed to help.
My year in Monzo
Each year Monzo summarises your annual spending into a personalised report which can produce some insightful results!
Monzo is a digital bank and as a result, there are no bank managers to build relationships with. The reality is you really need to be a high net-worth individual using private banking if you want this.
Monzo is a self-managed service meaning you won’t get the traditional banking wrap (including, for example, trying to sell you additional products). This may change over time as Monzo introduces new services, but at the moment it’s a current account and savings account only.
There are a few other consideration:
- Pay to pay-in cash – you can pay cash into your account at any PayPoint location, but it will cost you £1 per deposit.
- No value-added services – there is no paid account options where you get mobile phone/travel insurance, car breakdown cover etc.
- Lack of personal support – there are no physical branches so the personal banking feel is not something you will experience.
What do you need to open a Monzo account?
- Over 16
- UK Resident
- Proof of ID (Driving Licence, Passport etc.)
To apply for a Monzo current account, simply follow these 5 simple steps:
- Download the Monzo app
- Enter your details when prompted
- Confirm your ID with a selfie & photo of your ID
- Tell Monzo where to send your card
- Activate your card once it arrives
It takes about 5 minutes and your new pink (officially the colour is ‘Hot Coral’) card will be with you in a few days. During the application process, you may also be offered an overdraft.
Monzo Bank Alternatives
Monzo vs Starling
Monzo’s primary competitor is Starling Bank. Monzo was founded when some of the management team left Starling to start up their own challenger bank. Starling is another “digital challenger bank” which also promises to revolutionise your finances.
Some user feedback is that Monzo has a cleaner interface and people feel the app is more intuitive. This has helped Monzo win Best Banking App at the 2019 and 2020 British Bank Awards. Starling, on the other hand, has taken the Best British Bank for the last three years and Best Current Account 2019 and 2020.
Check out the table below to compare Monzo and Starling.
|UK ATM limit||£300||£300|
|Interest (current account)||0.05% AER up to £85k||0|
|Interest (saving account)||0.05% AER up to £85k||Savings Pots offer Easy Access at 0.5% AER or Fixed Terms at up to 0.88%|
|Round Ups||Yes, into Goals||Yes, into Pots|
|Loans||Yes, but not competitive||Yes, but not competitive|
|Joint Accounts||Yes, both must have a current account||Yes, both must have a current account|
|Contact||Yes via app or phone||Yes via app or phone|
|Protection||Funds up to £85,000||Funds up to £85,000|
|Business Banking||Yes, Free for businesses of 10 staff and under 1.7 million turnover||Yes, Free Lite account or £5 per month Pro account|
Monzo vs Revolut
Another strong competitor is Revolut, which is firmly aimed at those who travel. It offers fee-free spending in 120 countries and international bank transfers in 23 currencies.
For people travelling frequently or sending money abroad, this beats Monzo hands-down. Uniquely, Revolut also allows you to buy, sell and transfer cryptocurrencies directly from the app in real-time. Currently, they support Bitcoin, Litecoin, Ethereum, Bitcoin Cash and XRP.
Revolut is the most recent to pick up an official European banking licence (via Lithuania).
Finally, though it was some time ago now, be aware that in mid-2018, customers reported being locked out of their accounts, leaving some users stranded overseas without access to funds.
What is a Monzo golden ticket?
In the past, you were given three golden tickets when you opened an account. Golden tickets used to act as an insider program, so you could give your golden tickets to friends who could jump the queue for setting up an account. Today, setting up an account is so quick and easy, there are no queues and therefore the benefits golden tickets are less relevant.
In addition, there used to be a referral programme where you and a friend would get £5 each when you referred them using a Golden Ticket and they opened an account. Alas, however, this program was pulled in late 2019 as Monzo hit it’s customer growth targets.
See your receipts with Monzo & Flux
Thanks to a recent partnership with Flux, you can now see your full receipts in your Monzo app from selected retailers. But at the moment, there are only a few retailers using Flux so its usefulness is limited.
Once you spend money at one of these retailers, Monzo will prompt you to link Flux. After the five-second process is complete, you will be able to see a full breakdown of what you spent. Paper receipts could be a thing of the past!
Why are people switching to Monzo?
Monzo’s industry-disrupting features have helped us personally organise our finances in a way that has taken the stress out of making money stretch to the end of the month.
In particular, the ability to ring-fence saving ‘pots’ such as for a holiday, upload a customer picture of the beach your heading to and see that you are 75% towards your saving target can he highly motivational and really encourages saving.
As a result, Monzo and it’s functionality features heavily in our Financial Fitness Plan. Without a challenger bank like Monzo, our automated money system would simply not be possible. If you would like to see if Monzo and our plan can help you, then why not download the first chapter free.
Monzo is making people talk about individual banking, which is great. New features are constantly being added and those changes are being driven by its customers.
Monzo promises to be a bank for its users and has lofty goals, which we really like. There is also a dedicated community of fans who want the bank to succeed and are keen to see it continue to develop. Overall, we love the app and find it very easy to use.
What do you think? Are you a Monzo fan or is it just a fad? Is Monzo going to get consumed by a larger bank? Has Monzo helped you budget or do you just want a sexy pink card? Leave a comment below and let us know how you are using Monzo. We would love to hear what you think and we respond to all comments.
….and finally, Monzo must be doing something right – check out how Halifax has responded here.
EatSleepMoney.co.uk does not offer financial advice and is intended for reference/information only. Remember, you should always carry out your own research and/or take specific professional advice before choosing any financial products or services or undertaking any business or financial venture. Investments may go up as well as down and you may get back less than you put in.
We only provide real and actionable updates. No spam, just honest and useful information. Hit Subscribe and we’ll email you occasionally when we’ve got something that will boost your financial fitness.