A Monzo bank account helps you visualise your money, making controlling your personal budget easy. Monzo, along with a few others, is challenging the traditional banking services by putting banking tools and services directly on your mobile phone.
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. Plus, Eat Sleep Money readers can get a FREE £5 when opening an 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.
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. The difference is in how Monzo organises 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. 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 technically it’s 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. Due to popular demand, the number of pots has now been filled 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.
Click here for Monzo’s latest blog post on Pots.
Monzo Easy Access Savings Accounts
Monzo currently offers a few different savings pots. You will need to have a minimum of £500 to deposit and interest rates range from 1.12% to 0.85%.
If you don’t have £500 to save then you can use a normal pot that does not earn any interest 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.
Looking for ways to save money – check out this article on 9 ways to save money fast.
Monzo ISA – Easy Access Savings Pot
The Monzo Easy Access Savings Pot comes in the form of a Cash ISA. 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.
To learn more about the rules behind holding multiple ISAs check out our complete ISA Guide.
The ISA is backed by a bank called OakNorth. The rate on offer from Monzo is 1.14% however if you go to OakNorth direct they offer a rate of 1.44%.
So why should you go via Monzo? With OakNorth require a minimum deposit of £1,000, whilst with Monzo it’s only £500. However, the main benefit of going via Monzo is that you can see it in the app. This can make managing your money easier
There are plenty of other better easy-access cash ISA’s on the market however others will not show up in the app. Savers should consider if the lower rate is worth the convenience.
Update: A new Easy Access Cash ISA is now available from Monzo provided by Shawbrook. This is similar to the Cash ISA above. You need a minimum of £500 and the interest rate is 1.12%
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 6 to 12 months. You will not be allowed to withdraw your cash during your selected term. 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.
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. Marcus currently offers a savings account that pays 1.50% for the first year and allows you to withdraw at any time.
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 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. You can use Bluetooth to transfer money to other Monzo users 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, 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 bills taken out. Doing the “full switch” would ensure you get the maximum benefit of all the Monzo features.
A second option 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.
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 the money is going to run out.
Unsure how to use Monzo? Try starting with testing the second option with a plan to go #FullMonzo” in future. The choice is yours.
Switching to Monzo is easy, use our link here to get £5 and then use the current account switching service in the app and have everything moved and completed within a few weeks.
Monzo Plus – Not Available
This value-added service from Monzo is no longer available. As of October 2019, 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 are:
- Exclusive Monzo Plus Card – Choose your colour from Hot Coral, Midnight Sky or Lagoon Blue
- Custom Monzo.me username – This gives you a personalised link when you request money from friends
- Access to exclusive events – meet the Monzo team and participate in community events
Additional features can be added like Travel Insurance (+£4 per month) and Travel Money (+£3 per month) allowing you to withdraw extra cash abroad.
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 can switch your energy bills
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 easy.
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, if you want a little bit more why not use our link and get £50! We have also written a review that could help you save even more.
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 switch you then.
Monzo says that these suppliers might not be the cheapest however they offer competitive rates with the level of customer service you would expect.
While this might make switching easy and save you money if you are on a standard variable tariff reviewing your energy bills once a year should be a standard task for any household. If you struggle to find time this could help but doing it yourself may be cheaper.
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, however, we have not been able to test the quality of support as we have never had a need to call.
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 – Get Paid Early
If you pay your salary directly into your Monzo account (#FullMonzo) you can get access to your cash sooner.
- Your salary needs to be paid by BACS (ask your accounts team if you are unsure
- You get the money at 4pm – 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!
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/travel insurance, 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 has opened a waiting list for business accounts. read more and join the list here. Update June 2019: Monzo is now starting to roll out business accounts to the 15,000 businesses that registered an interest.
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 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.
The feedback is that Monzo has a cleaner interface and people feel the app is more intuitive. Starling, on the other hand, provides better services if you are travelling abroad. If you are looking for a business account then Starling has the edge currently as Monzo has only just opened this up.
For our full Starling review click here.
Monzo vs Revolut
Another competitor is Revolut. Revolut 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 send money abroad, this beats Monzo. 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). 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?
You used to 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.
Now you can invite your friends to use Monzo by going to the transfers section and clicking “Invite friends”. Both friends used to get £5 each but in September 2019 Monzo adjusted the program so only the joining friend gets £5. It’s still worth doing and all the friends I have referred have thanked me for it.
Want to be our Monzo friend? Use our Invite a Friend link to get yourself £5 free.
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 5-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!
Monzo is making people talk about 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. Monzo has 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. #FullMonzo here we come!
If you want to try Monzo out join the pink card club then use our friends link here to get yourself £5.
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 will respond to all comments.
….and finally, Monzo must be doing something right – check out how Halifax has responded here.
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