09/03/2019
In today's fast-paced world, managing your money effectively is paramount, and digital banks like Monzo are revolutionising how we interact with our finances. Based right here in the UK, Monzo is a fully licensed digital bank that puts the power of banking squarely in your palm. With no physical branches, every interaction, from saving and spending to accessing loans and customer support, is seamlessly handled through your phone or via their intuitive app. This comprehensive guide will walk you through everything you need to know about Monzo, focusing on key aspects such as fees, exchange rates, spending limits, and crucially, how to get the most out of your Monzo account when you're travelling, whether within the UK or further afield.
Understanding Monzo: More Than Just an App
Monzo isn't just another banking app; it's a complete banking experience designed for the modern user. It offers a diverse range of accounts tailored to different needs, ensuring that whether you're an individual, a business owner, or looking for a joint account, there's a Monzo solution for you. Let's delve into the various account types and what they offer:
Monzo Personal Current Accounts
Monzo provides three distinct tiers for its personal current accounts, catering to various financial needs and budgets:
- Free Standard Account: This is Monzo’s entry-level offering, providing all the essential tools for daily banking. You get features like expense tagging, which intelligently categorises your spending, helping you understand where your money goes. Savings pots are also included, allowing you to easily set aside money for specific goals. Instant notifications keep you updated on every transaction, and all UK bank transfers are completely fee-free.
- Monzo Plus (£5/month): Stepping up from the standard account, Monzo Plus includes all the benefits of the free account, plus a suite of enhanced financial tools. This tier offers additional savings features, exclusive offers, and even interest on your account balance, helping your money work harder for you.
- Monzo Premium (£15/month): For those seeking the ultimate Monzo experience, the Premium account delivers. Alongside all the Plus features, Premium customers enjoy extra perks such as free travel insurance and an even better interest rate on their Monzo savings, making it a compelling choice for frequent travellers or those looking for more comprehensive benefits.
Monzo Business Accounts
Small business owners are also well-catered for, with two dedicated business account options:
- Monzo Lite Account (Free): This is a great starting point for entrepreneurs, offering core business banking functionalities without a monthly fee.
- Monzo Pro Account (£5/month): The Pro account builds on the Lite version, providing advanced features specifically designed to streamline business finances. This includes invaluable tools like tax pots to help you save for your tax bill, and integrated accounting solutions to simplify your bookkeeping.
Monzo Joint Accounts
If you're looking to manage finances with a partner or housemate, Monzo makes it incredibly easy to set up a joint account. If you already have a personal Monzo account, you can add a joint account without needing to go through further ID checks. Each account holder receives a dedicated card, and you can conveniently track spending by individual, making shared finances transparent and straightforward.
Monzo 16-17 Accounts
Monzo also extends its services to younger customers aged 16 and 17, providing an account that mirrors many features of the adult account. However, there are sensible age-related restrictions in place; for instance, you cannot use the account for gambling, which is illegal for minors, and overdraft facilities are not available. This makes it an ideal way for younger individuals to gain experience with a full bank account, learning financial responsibility with reduced risks.
As with any financial product, understanding the associated fees, rates, and limits is crucial before committing. Monzo prides itself on transparency, but it's important to be aware of how certain transactions might incur charges.
Monzo Fees at a Glance
While opening your account, sending money within the UK, and receiving your first debit card are all free, some services do come with a charge. The good news is that many fees, particularly for ATM withdrawals, depend on meeting certain criteria, which can help you avoid them.
For example, you can make higher value ATM withdrawals for free if you meet one of the following conditions:
- You have one active direct debit on your Monzo account, and at least £500 paid into the account in the past 35 days.
- You've received certain government payments into the account in the past 35 days.
- You've received a student loan payment into your Monzo account in the past 8 months.
- You have a joint account and the other account holder meets one of the above conditions.
Here’s a breakdown of key costs you’ll want to consider:
| Service | Monzo Fee Details |
|---|---|
| Sending International Payments | Arranged via Wise using the mid-market exchange rate. There is a small, transparent fee to pay to Wise. |
| Receiving International Payments | It is currently not possible to receive international payments directly to your Monzo account. |
| Cash Withdrawals in the UK | Free if you meet eligibility criteria (as listed above). If not, you can withdraw up to £250 in a 30-day period fee-free, with a 3% charge applied thereafter. |
| Cash Withdrawals in the EEA (outside UK) | Free if you meet eligibility criteria. If not, you can withdraw up to the currency equivalent of £250 in a 30-day period fee-free, with a 3% charge applied thereafter. |
| Cash Withdrawals Outside UK & EEA | You can withdraw up to the currency equivalent of £200 in a 30-day period fee-free, with a 3% charge applied thereafter. |
Monzo Account Limits
Certain limitations apply to some Monzo accounts. For example, the youth account restricts payments for activities illegal for under 18s. As mentioned, you cannot receive international payments directly into your Monzo account, nor will you receive a cheque book. It's always advisable to consult the specific terms and conditions for your account type if you have any uncertainties regarding limits.
Monzo Rates: Interest & Overdrafts
Understanding the interest rates for savings and overdrafts, as well as the exchange rate for foreign currency transactions, is vital for managing your money with Monzo.
| Rate Type | Monzo Account Rate Details |
|---|---|
| Interest on Savings | Both fixed-term and easy-access savings options are available, with varied rates. Easy-access savings can earn around 0.15%, while fixed-term savings may accrue up to 0.53% (rates are subject to change). |
| Interest Payable on an Overdraft | If you arrange an overdraft in advance, the applicable rate will be clearly shown before you confirm the transaction. If you accidentally overspend and go into an unarranged overdraft, you’ll incur an interest rate of 33.4%, with a monthly charge cap of £15.50 on these charges. |
| Exchange Rate when Spending Abroad | When you spend money overseas with your Monzo card, you will benefit from the Mastercard exchange rate. This rate is typically very fair and reflects daily market fluctuations without any hidden markups from Monzo. |
Using Monzo Abroad: Your Travel Companion
One of Monzo's standout features is its utility for travellers. You can seamlessly use your Monzo card to spend and make ATM withdrawals in foreign currency, often saving you money compared to traditional banks.
Monzo in Singapore and Beyond
A crucial point for those considering Monzo for international use: you cannot open a Monzo account if you are currently in Singapore. Monzo's eligibility criteria stipulate that you must be a UK resident to set up an account. However, if you already have a Monzo account and are travelling in Singapore, you will still be able to access and use your account as normal. Monzo has expressed plans for international expansion in the future, so keep an eye out for updates if you're an overseas resident hoping to join.
Spending Overseas with Your Monzo Card
When you use your Monzo card abroad, you benefit from the Mastercard exchange rate, which is a mid-market rate without any additional markups from Monzo. This is generally one of the most favourable rates available. However, it's important to be aware of potential extra costs added by local ATM operators, which are separate from Monzo's fees. Always check for these charges before completing a withdrawal.
Beware of Dynamic Currency Conversion (DCC)
A common pitfall for travellers is Dynamic Currency Conversion (DCC). This is where you are offered the option to pay in your home currency (GBP) rather than the local currency (e.g., Euros in Spain or Singapore Dollars in Singapore). While it might seem convenient to see the cost in pounds, choosing to pay in GBP means the merchant or ATM operator will apply their own, often less favourable, exchange rate, along with potential additional fees. To ensure you always get the best possible rate – the Mastercard exchange rate – always choose to pay in the local currency wherever you are.
Overseas Payments with Monzo
For sending money internationally, Monzo highly recommends using Wise (formerly TransferWise). This service leverages the mid-market exchange rate with transparent, low fees, offering a more cost-effective solution than many traditional banks. Wise is known for its modern approach to currency exchange and international payments, providing both personal and business payment services, alongside a free online multi-currency account.
Pros and Cons of Monzo
Still weighing up whether Monzo is the right fit for your financial needs? Here's a quick summary of its advantages and disadvantages:
Pros:
- Diverse Account Range: Offers various account products for personal users, businesses, joint accounts, and youth.
- Simple, Low Fees: Many core services are free, with clear pricing for other transactions and options for free accounts.
- Excellent Exchange Rates: Benefits from the Mastercard exchange rate for international spending and recommends Wise for competitive overseas transfers.
- Smart Budgeting Tools: Features like expense tagging and savings pots help you manage and understand your money better.
- Safety and Security: Your money is protected by the UK government’s Financial Services Compensation Scheme (FSCS) up to £85,000, and Monzo employs robust security measures.
Cons:
- UK Residency Requirement: You cannot open a Monzo account if you are not a UK resident, limiting immediate access for those abroad.
- ATM Withdrawal Fees: A 3% fee applies to excess and international ATM withdrawals if certain eligibility criteria are not met.
- No Face-to-Face Service: All customer support is handled digitally via the app or online, which may not suit everyone.
- No Incoming International Payments: You cannot receive international bank transfers directly into your Monzo account.
Frequently Asked Questions
Do I need a regular bank account to get a Monzo account?
No, your Monzo account and card are independent of any other bank accounts you might hold. You don't need a separate traditional bank account, as Monzo offers a comprehensive range of services, effectively functioning as your primary bank.
How safe is Monzo?
Monzo is a fully licensed UK bank and is backed by the UK government's Financial Services Compensation Scheme (FSCS). This means your eligible deposits are protected up to £85,000 in the unlikely event Monzo were to fail. Furthermore, Monzo employs industry-standard, and often superior, security measures to protect your money and prevent fraud.
Does Monzo affect credit?
Checking your eligibility for a loan or overdraft with Monzo typically involves a soft credit check, which does not impact your credit score. Only when you formally apply and accept a credit product will a hard credit check be performed, which may leave a mark on your credit file.
Does Monzo charge for withdrawals?
Monzo offers fee-free ATM withdrawals up to certain limits, which vary depending on whether you meet specific eligibility criteria and where you are withdrawing money (UK, EEA, or outside EEA). Beyond these limits, or if you don't meet the criteria, a 3% fee typically applies. Always check the specific conditions for your account and location.
Does Monzo have a business account?
Yes, Monzo offers two distinct business account products for small business owners: the free Monzo Lite account and the Monzo Pro account, which comes with a monthly fee but includes advanced features like tax pots and integrated accounting.
Can I receive international payments with Monzo?
Currently, you cannot receive international payments directly into your Monzo account. For sending money internationally, Monzo recommends using services like Wise, which are designed for cost-effective cross-border transfers.
In conclusion, Monzo has firmly established itself as a highly regarded and trusted digital bank in the UK. Its user-friendly app, transparent fee structure, and innovative features for budgeting and saving have earned it a loyal user base. With over 4.8 million users and growing, Monzo is continually looking towards international expansion, aiming to bring its convenient and modern banking services to a wider global audience in the future. While opening an account from Singapore isn't possible right now, its current offerings make it an excellent choice for UK residents looking for a modern banking solution, especially when travelling.
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