I'm an American who has a Monzo card and has spent a fair amount of time in London. Why don't people use credit cards???? The rewards are usually pretty good and as long as you pay off your balance every month, you're getting ~3% of your purchases back in rewards/credit
I stopped using Monzo because there are no rewards! Sure it gives me notifications and is easier to see my balance/add money than my Barclays account, but what is the point of the good UX/UI? Is it for fraud detection and making sure the merchants/bank aren't cheating you?
I ended up going back to using my oyster card/barclays card when contactless was the only option, and credit for everything else. Transferwise was also a godsend for converting money with clear visibility into the exchange rate/no fees
I agree that Monzo has been a great catalyst for UK banks to get their shit together on mobile apps etc. but there is nothing fundamentally different about their business...they're a debit-only bank with no physical presence and a nice app - and why don't more people use credit cards instead? Is it because it makes P2P transfers easier than the archaic bank transfers?
I opened a secured card here in the US, but I never use it, because it just feels weird to "owe" the bank money and not to be able to pay it back as fast as I can. I usually have to wait for the end of the month, and if I mess something up then I have to pay huge fines (that you cutely call APR).
The more you get into this system, the more you seem to collect credit cards. I have friends with dozens of them. What happens if you lose one? Or if you get your wallet stolen? Or if you forget that after the first year you start paying fees on it? etc.
Most of us can live without the rewards if we get other benefits. For example with Monzo, you get added security, you can use it all over the world for free, you can send money to your friends or split the bill easily, you can track your finance, set limits on your budgets, see what was that 30$ you spent a month ago and where it was, round up your purchases to save money, etc. There's just so much benefits that you end up using it all the time as your default card. That's how they get you I guess. But it's so much more practical and easy to use that people have fell in love with their branding as well.
This is what I struggle with understanding. Maybe it's because I'm from a "slightly" older generation. But I've watched my younger colleagues one after another get Mondo(Monzo) cards and I've quizzed them on why they switched. The answers came in two categories a) because it has an app and b) dunno? because everyone else has one. So...I'm still stumped for a good reason to switch.
But kudos to the company behind this because I do appreciate the fact that it seems to have been a kick up the backside of ye olde guard.
I think an entire generation of students in England and Wales who now are paying up to £9000 per year of study would likely disagree with this.
While this is still less than many US examples, it's still a ton of debt for the average UK student who is unlucky enough to have an English or Welsh postcode (Scotland continues to offer free higher education). Especially so when you consider average graduate salaries in the UK.
i.e Government Issues some Bonds -> Bank buys the bonds with bonds at interest, Federal Reserve print more green paper using the instrument of debt and we all(world) stupidly buy American green paper(Dollar) thinking it has value.
Few cycles, a economic crisis and a purge later they print more notes and cycle continues.
So far as I’ve seen, most credit cards issued in Europe don’t have huge rewards like that because card networks are capped in how much they can charge merchants for card processing. Add into that a penchant for not acquiring open-ended (revolving) debt, and there you go.
Remember that those rewards in the States are paid for by relatively high processing fees charged to merchants (2.5% plus a flat fee of around a quarter) and the interest paid by people who carry balances. And that interest rate is regularly in the low to mid 20% annual rate range.
They do in the UK, which this article is about.
I don't agree with the "rewards", which seem like a massive scam, which rips off everyone though higher prices irrespective of whether they pay by credit card or not, and I refuse to be a part in that. I likewise refuse to bother with any other dodgy scheme like mail-in rebates. Charge me a fair price up front, and I'll pay it in full, there and then. No silly financial games.
The “Europeans are debt adverse” argument doesn’t really make sense to me either - if you clear your credit card balance each month this is in practice much the same to you as having purchased the same goods on your debit card, just minus many kinds of rewards or benefits.
The amount of money I receive in cashback via credit cards largely dwarfs any kind of interest I make on the cash in my household spending current account.
So the features in these challenger banks are largely useless to me, and I track all my finances elsewhere anyway
However, you can't put everything on a credit card in the UK, like household bills and rent, so you still need a current account for this. I use my Starling account for this and it works fine.
Some people don't have financial discipline so I'd imagine the credit card might lead to temptation, so they stick with a debit card to know exactly what's going on.
Granted this is a very niche tech-savvy group of people between 20 and 40, but the established banks must be starting to feel the effects?
Most have a regular bank as their main account but like me hardly use it anymore, and some probably closed them altogether.
Though I am feeling more resistance from family and my non tech friends. But I think with time they will also try it and be converted.
what. First, there are no offers with decent interest rates out there. Second, Revolut has insurance. Third, Monzo is so awesome that most people just use it even though it's a debit card.
when I say insurance, I mean, for instance, when I had a halifax current account, they threw in AA coverage, and mobile phone insurance as part of having a current account with them. I'm not aware of any challenger bank that has extras like that.
I don't say that to be facetious, I think there's a difference of perspective here which is only going to widen if you think they are a prepaid card. They set out to make a bank, and started with prepaid cards, but that was never the end goal, it was just a way to test out the UI before getting a banking license, so expecting people to pay money in as you would to any other bank account makes perfect sense. This is not a prepaid card you load up, it's a bank account, and they don't want users to think of it as a prepaid card.
So I think their user satisfaction for people who want a bank account is doing well - as evidenced by their new customer growth. Can't wait to see them launch in the US market as it is also ripe for disruption and I think they have the scale and ambition to do well there.
This provided a nice usuable way to get money into the account from a "legacy" bank that doesn't have a good mobile story.
Now if you have Monzo + a legacy account (as many do) you have to go log-in to the legacy account to move money to Monzo.
Ofc once you go "full monzo" that's not a problem any more but it's still early days for that and Monzo have had enough service glitches to make people a little nervous of committing to having it as their only account, I think.
Its been a flawless experience and I'll never look back.
From a technical perspective I think it could be easy to believe that because they're a startup your money is in someway less safe, or the service less reliable.
But I actually think that because of the sheer technical debt old banks struggle with (they're ticking time bombs on the inside) the opposite might be true.
Personally I switched almost a year ago (when they introduced CA), and am happy with that choice so far - kept my old bank just in case but haven't needed it. Re outages many banks have had major outages recently, far more than Monzo... They had a few glitches early on (late last year), but I'm fairly confident of their ability to scale now.
However it is a feature that Monzo had, which was easy to use and they got rid of it (IIRC due to the costs of providing it), which decreased usability, which I think was the original point the poster made...
When I was transitioning I did a v. small standing order first for a few months and used it for spending, then upped the amount, then eventually switched over salary, direct debits etc.
This was a habit that a lot of us had taken, and as described above, it was just easier to do all in one place: - Go check your monzo app - Notice you're low on fund - Top up using your card
A lot of us haven't switched completely, because why would you when other current account can give you travel insurance, small % of interest, etc.
This is incorrect - it was possible for a long time to top-up via bank transfer. Certainly during beta. It simply required using a shared sort code/account number with a specific numeric reference which tied the payment to your account.
It wasn't as instant as it is now (with Faster Payments), but it was still definitely possible.
I used to use it all the time while traveling, and usually top up on the spot when the funds on the account run out and I needed to pay for something.
Bank transfers really doesn't work for that use case.
Now I'm using Revolut for the same purpose (they still allow card top ups), not much difference to Monzo although I really, really like Monzo customer support.
That's the only way to get money into a Revolut account. That, Apple Pay or a SWIFT transfer which costs a fortune.
Now you need to go in your bank's app, log-in there, go through many menus (because banks which are not Monzo or Revolut have no clue about UX) in order to send money to your Monzo card.
It's still free, and instantaneous. It's just more cumbersome now.
They also removed the "no fee withdrawals abroad" and now you pay a pretty substantial fee (3%) above 200GBP per month. I might be wrong on these numbers but this is what I remember.
If they are your bank you don't need to add money periodically with a card.
The fee for withdrawals abroad is unfortunate but perhaps they'll be able to up the limit sometime.
Debit card payment into a bank account is kind of an odd feature anyway, it seems like a bit of a relic from back when Monzo weren't a fully-fledged bank, and were just offering a prepaid card.
They recently released a savings "pot" (how they split up money) with interest (1%, provided by another company). Which is a step towards offerings of other banks, and in my book is a step towards user satisfaction.
https://monzo.com/blog/2018/01/18/future-of-prepaid/
Edit: More relevant link: https://monzo.com/blog/2018/04/04/ending-prepaid/
Edit: Bank transfers are instant in most cases and don’t cost Monzo. So we should do our part to help them if we want something better.
One thing that bothered me more was the fee for withdraw abroads.
Monzo is even a verb as in "can I Monzo you?" or "let's split with Monzo"
It's just that freaking awesome.
This is starting to feel a bit like China Mieville's The City & the City, two worlds inhabiting the same space but never interacting...
Maybe I'm not the target demographic or something. Or is it only marketed in London?
Not a worry unless they go bust of course, but one to be aware of ...
I'm using it for overseas expenses, but the time taken to fund it and keep an eye on it is outweighing the savings made using it.
In fact if you want say a US bank account and don't live there Transferwise may be the easiest way to have one.
Huge stat from the article;
> And in terms of customer growth, extrapolating stats from a recent Nationwide annual report (PDF link), the challenger bank says it now accounts for 15 percent of all new bank accounts opened each month in the U.K
Is this accurate? 15% of bank accounts opened in the UK each month are for Monzo? That's an insane stat.
No affiliation, just a happy Monzo Beta user.