There is a new bread of challenger banks promising a digital revolution of the traditional banking experience. Monzo is one of the market leaders but, is Monzo right for you? We review what all the fuss is about and why millions of people have signed up.
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. Monzo’s tagline is “The bank of the future” and promises a bank that works with you, for you. In this article, we review Monzo bank and explore some of the features you simply won’t get with the traditional high street banks.
Why is Monzo bank different?
The Monzo banking platform has been built with the younger “digital” generation in mind. They have not had to accommodate banking systems that were developed in the 80s and they do not carry the legacy banking mindset. That being said, Monzo is very much like every other bank account, you put money in and you take money out (spend it). The key difference is how Monzo manages your money and allows you to budget.
Budgeting and saving with Monzo
This is where Monzo really jumps out. Every time there is a transaction on your Monzo account you receive a notification. 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 meaning 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.
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 budgeting 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 technically it’s in the same account. You can move money
You can set images against each savings pot so you can visualise what you plan to use that money for.
One of the new features is a Savings Pot backed by Investec. This allows you to use Monzo as a true savings account and at the time of publishing gives you a 1% return on balances over £1,000.
Due to popular demand, Monzo has stopped providing the Savings pots backed by Investec. However, you can still use pots to put aside cash without earning interest. Additional savings options have been added below
The “Round up Transactions” feature allows you to round up every transaction to the nearest pound and dump the change into a specified pot.
Click here for Monzo’s latest blog post on Pots
Monzo Fixed Savings Pots
Monzo offers Fixed Savings Pots. You will be expected to deposit a minimum of £500 and you won’t be able to withdraw your money for 6 to 12 months. Your reward for using the fixed savings pot will be a guaranteed interest rate:
- 6 Months = 1.36%
- 9 Months = 1.46%
- 12 Months = 1.55%
The Fixed-Savings Pots are backed by a bank called OakNorth. Monzo usually partners with other financial institutions to provide these bolt-ons.
Monzo ISA – Flexible Savings Pot
Monzo has added a Cash ISA option to the savings pots on offer. The ISA has all the regular rules that apply like you can only open one cash ISA per year and you can only pay into one per year. If you have already paid into one or opened a new ISA this year then you will have to wait.
The ISA is backed by a bank called OakNorth. The rate on offer from Monzo is 1.14% so nothing crazy however if you go to OakNorth direct they offer a rate of 1.44%.
So why should you go via Monzo? With OakNorth there is a minimum deposit of £1,000, Monzo still
At the moment there is no way to transfer your existing ISA to Monzo
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.
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 over via their image which shows in the transfer section of the app. A further enhancement to this is the ability to pay contacts near you. Monzo can also use your Bluetooth to transfer money to other Monzo friends in close proximity.
To get the most out of Monzo bank account you need to be using the budgeting tools to manage your money and assess what your spending habits are. Also, if your friends are using Monzo as it makes splitting bills and minor payments really easy. However, if you have no interest in this then really it’s just a new 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 and you don’t need to tell them in advance. Monzo pass the Mastercards exchange rate directly to its customers
You can withdraw up to £200 from foreign cash points every 30 days and after this, there is a 3% charge.
When you land in a country, Monzo (via the mobile app) will send you an alert to advise you the current exchange rate. Your transactions in the country will be categorised and a summary will be produced on your return.
These are the features that traditional banks have not even thought of!
How safe is my money?
Monzo received its banking licence in April 2017. Monzon bank 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).
Your money held with Monzo fully protected by the Financial Services Compensation Scheme (FSCS), meaning that up to £85,000 is guaranteed by the British Government. The FSCS has a specific Monzo page detailing its protection (It has this for most big banks too).
Should you switch?
Monzo can be your only bank account meaning you can have your wages paid into it and
A second option is to transfer a monthly 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.
Unsure how to use Monzo? Try starting with testing the second option with a plan to go “full Monzo” in future. The choice is yours.
Finally, unlike some of the other high street banks, Monzo does not currently offer any rewards for opening an account.
Switching to Monzo is easy, you can use the current account switching service and have everything moved and completed within a few weeks.
Monzo doesn’t have high street banks so you can’t pop in and talk to someone about your account. But don’t worry, there is a UK freephone telephone number, email address and chat built into the app if required.
Customer support: 0800 802 1281 (020 3872 0620), chat in the app under “Help” or email [email protected]
When we tested calling Monzo’s support number our call was picked up within 10 seconds. Very impressive
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. Monzo allows you to withdraw up to £200/month while abroad for free, after which a 3% fee is charged. You can still make payments in shops, restaurants and online for free though, even when abroad.
Monzo Bank – The benefits
- Can fully replace your existing bank account
- Easy to use mobile app
- Free to use abroad
- Helps with budgeting and savings
- Allows you to separate money easily (into pots)
- Can instantly freeze your card if lost (and if found unfreeze)
- You get an instant mobile notification when money is spent allowing a change the categorisation if required
- Easily transfer money to friends using contacts or Bluetooth
- Split bills easily with other Monzo friends
Monzo summarise your annual spending which can produce some insightful results.
Monzo is a digital bank, 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 (for example, trying to sell you other products). This may change over time as Monzo introduce new services but at the moment it’s a current account and savings account only.
Other negatives have been listed below:
- Paying in cash – You can pay cash in at any PayPoint location but it will cost you £1 per deposit
- Value-added accounts – There are no paid accounts where you get mobile
phone / travelinsurance, car breakdown cover etc.
- Personal support – There are no physical branches so the personal banking feel is not available.
- Business Banking – currently Monzo is for personal banking only
Business Account Update: Monzo have opened a waiting list for business accounts. read more and join the list here.
How to apply
To apply for a Monzo current account simply download the app and follow the simple instructions. It takes about 5 minutes and your new pink (officially the colour is 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’s primary competitor is Starling Bank. Starling is another “digital challenger bank” which also promises to revolutionise your finances. There are very few differences between the two and we are going to follow up this article with a comparison.
Another competitor is
What is a Monzo golden ticket?
You get three golden tickets when you open an account. Golden tickets used to act as an insider program, you could give your golden tickets to friends who could jump the queue for setting up an account. Today, setting up an account is quick and easy, there are no queues so the benefits golden tickets are less relevant.
Currently (Feb 2019), Monzo is offering £5 for you and a friend if they sign up with a Golden Ticket you have sent them. These guys are so confident you’ll love the app, they’re not even competing with the £100 offered by some of the high street banks. Willy Wonka they ain’t, but something is better than nothing!
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. At the moment there are only a few retailers using Flux, once you spend money at one of these Monzo will prompt you to link Flux. Once the
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