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Beginners Guide to Monzo the UK’s Digital Bank

Monzo is famous for several reasons. Each month, it gets better and better by adding more features for its tech-savvy customers. It’s user friendly and enables you to enjoy peace of mind with full financial visibility. If you want to save, spend and manage your money all in one place, choose Monzo.

What is Monzo?

Monzo is a UK based digital bank focused on solving problems rather than selling financial products. Launched in 2016 as a prepaid Mastercard, Monzo is aiming to make money work for everyone.

Five extraordinary individuals founded the smart bank. They are Paul Rippon, Tom Blomfield, Gary Dolman, Jonas Huckestein and Jason Bates. All worked at Monzo’s rival, Starling Bank, before joining hands to co-found Monzo.

The founders believed in an alternative to traditional banking. That is why Monzo is doing things differently. For a long time, traditional banking has been complex and opaque. Monzo is changing that by building a bank for everyone with everyone. Its vibrant community suggests new features and tests the app to ensure Monzo builds something everyone loves.

In 2017, Monzo received authorization from the Financial Conduct Authority. At the same time, Monzo launched its current account service. This brought to a halt the prepaid card.

Today, Monzo markets itself as a smart bank that lives on your smartphone or tablet. Currently, it has more than 5.1 million users globally.

Using the Monzo app, you can pay Direct Debits and manage their funds. The app also sends instant notifications the second you spend. You can set a budget for grocery shopping or eating out. If you spend your money too fast, the app will send warning alerts.

Features of Monzo

Cash Withdrawal Abroad…

With Monzo, you can withdraw from an ATM in the European Economic Area for free. For other countries, Monzo allows you to withdraw £200 for free every 30 days. After that, Monzo will charge you 3%. The decision to charge customers for ATM withdrawal came about after a vote by its customers.

When Monzo was offering free ATM withdrawals abroad, they were losing money. To keep providing its innovative bank services to users, they chose to introduce some limits – charge 3% for amounts larger than £200.

Spend Abroad…

Besides withdrawing money from international ATMs, Monzo allows you to spend anywhere in the world. You can pay in restaurants, shops and online with no fees. Monzo passes the Mastercard exchange rate directly to you, and they do not add extra charges.

Travel Reports…

Monzo will let you know the current exchange rate immediately you land at your destination. You’ll also receive tips on travelling with your Monzo card in your destination country. The app will let you automatically categorize your transactions as expenses or holidays. When you arrive back home, Monzo’s travel reports will show how much you spent.

Energy Switching…

Want to save money on your energy bills? Monzo provides energy switching, saving you money. By switching energy providers and shrinking your energy bills, you’ll get up to £50 credit. Switching energy providers takes 5 to 10 minutes with no exit fees. You can choose from Monzo’s handpicked providers using renewable electricity.

To switch energy providers…

Launch your Monzo app

  • Go to your Profile
  • Tell Monzo about your meter and home
  • Select a quote from Monzo’s trusted providers

Monzo will share your information with its suppliers and will notify you when the switch is over.

Track and Settle Ongoing Bills…

Tracking and settling bills can be a pain. For example, you’re on holiday with friends or a night out with drinks and dinner. To ease tracking and settling of bills, Monzo created Shared Tabs.

It allows you to keep track of ongoing bills easy. With a few taps, you can add a bill to the Tab. You can keep the Tab running for as long as you need or settle individual bills even on the go.

Want to split bills evenly? Shared Tabs has a Split bill feature that you can use to split bills equally or however you like.

Loans…

Want to renovate your home or buy a new car? Monzo provides a personal loan to help you get there faster. If you’re eligible, Monzo’s APR is 26.6% on loans up to £3,000. There is no waiting around. Monzo will put the money in your account the same day.

You can select a repayment date that suits you or change when you need to. Monzo will not charge you. It will also not charge you if you pay off the loan early or make extra payments. If you need support, you can speak to friendly humans over live chat via the Monzo app. Alternatively, you can reach the support team on the phone, 24/7.

Arranged Overdrafts…

Get arranged overdrafts when you need a little extra money. Unlike loans, overdrafts are for short term borrowing. As such, they’ll cost you less to pay them back quickly. If eligible, you could have an overdraft limit of up to £1,000. This does not apply to everyone. You can change your limit or cancel your overdraft anytime.

If you borrow an overdraft of £1,000 with 39.0% EAR/APR (variable), it will cost you £27.45. Your rate depends on your credit score. Before you borrow an overdraft, the Monzo app will display the exact rate you’ll pay.

Automated Savings…

With automated savings, you can get in the habit of putting a little money away. If you spend more than £1, the Monzo app will round up the change to the nearest pound. It will then add the amount to your Savings Pot.

The Financial Services Compensation Scheme always protects the money you put into your Savings Pots up to £85,000. This limit is usually applied to each person and the total money you’ve with the provider. The app is currently designed to keep your Savings Pots from your balance.

How Do I Open a Monzo Account?

Before signing up for a Monzo account, you must be a UK resident aged 16 years and over. Since Monzo is an app, there are no branches.

To open an account, download the Monzo app. Install the app on your smartphone or tablet, then launch it. Your Monzo bank account is a full UK bank account. As an account holder, you’ll have an account number and sort code. The first screen will have inspirational messages about Monzo’s key features and better banking.

To set up your account, Monzo will require you to enter your email. The app will then send you an email to verify your account. If you click the link, it will send you back to the app, where you can enter the following details:

  • Name
  • Date of birth
  • Address
  • Phone number

You’ll receive a message with your verification code. To verify your identity, Monzo uses credit reference and anti-money laundering systems. You need to provide your photo ID, such as a passport or driver’s license. Also, send a five-second selfie video of yourself delivering the message it suggests. Don’t worry, it’s totally private.

If approved, Monzo will post your new contactless Mastercard that you can immediately set up your PIN.

Monzo Accounts

Monzo currently offers 6 accounts…

  • Monzo Current
  • Monzo Plus
  • Monzo Premium
  • Monzo Business
  • Monzo Joint
  • Monzo 16 – 17

Monzo Current and Joint Accounts…

The Monzo Current account is the original account. It has the usual features such as setting up direct debits, withdrawing cash and receiving your salary. It also allows you to transfer money and manage your money even on the go.

The joint account has all the standard features such as instant spending notifications and Saving Pots. Both accounts are fully licensed UK bank accounts. This means you can borrow loans and overdrafts and earn interest on your savings.

You can also swap your current account for a Joint account. To do so, use the Current Account Switching Service. When using a current or joint account, you can transfer money quickly and set budgets for different categories. You can also make payments on the go by linking your account with Google Pay or Apple Pay.

Monzo Plus…

The Monzo Plus is a subscription account with extra features. Unlike the Monzo Current account, the Plus account costs £5 a month. Once you sign up, you must subscribe for a minimum of 3 months before you cancel.

As a Monzo Plus account holder, you’ll have access to the following features…

  • Holographic card
  • Virtual online cards
  • Improved categorization
  • Earn interest
  • Rewards
  • Free cash deposits
  • Roundups
  • Export transactions

Fee-free cash withdrawals at PayPoint across the UK.

Monzo Premium…

Monzo Premium is also a subscription account with similar features to the Monzo Plus account. Additional features include a shiny new metal MasterCard, competitive interest rates and insurance. The Premium account is for customers aged between 18 to 69 years old. It has a monthly cost of £15 with a minimum subscription of 6 months.

Learn more about Monzo Premium.

Monzo Business…

The Monzo Business account was recently added. For a while, Monzo has been testing its features before opening to everyone in early 2020. The account helps small businesses stay on top of their finances. As an account holder, you can manage your business account online with web and mobile.

The app allows you to integrate account tools and keep track with in-app digital receipts and invoicing. You can get Business Pro or Lite. Business Pro is £5 per month while Lite is free. The difference between the two accounts is that Business Pro has the following extra features:

  • Tax Pots
  • Integrated Accounting
  • Multi-user access
  • Invoicing
  • 6 Months Xero free
  • Exclusive offers

Monzo charges £1 to pay in cash at PayPoint across the UK.

Monzo 16-17…

The Monzo 16-17 is an account specifically for teens. It has all the features and freedom of an adult bank account but with a few limitations. First, Monzo blocks spending on illegal things if the account holder is under 18 years. For example, gambling, drugs and others.

Second, you’ll not be able to get an overdraft if under 18. But Monzo will not charge you if you spend more than you’ve got or accidentally overdraw from your account.

As an account holder, you’ll get…

  • A contactless debit card – to spend online in shops and withdraw cash
  • A full UK current account – with an account number and sort code

The app provides access to all the accounts. All you need to do is download it to your smartphone and add your other bank accounts and credit cards. By doing so, they’ll be visible on Monzo. You can view your transactions, balances and move money between accounts.

Monzo Fees

Paying by card abroad is always free. Monzo does not charge any fees for using its card worldwide. If you opt for Monzo to bill you in the local currency, you’ll receive the best exchange rate. Monzo will charge you a small fee for withdrawing cash abroad. The bank will charge you 3% on withdrawals over £250 every 30 days.

Customers can withdraw their first £200 for free for the rest of the world in a rolling 30 day period. Thereafter, Monzo will charge you 3% for each withdrawal you make. Your allowances are always shared across all your accounts.

For example, you withdrew £150 on the 2nd of the month and £50 on the 7th. This means your allowance will reset on the 2nd and 7th of every month. If you make a third withdrawal, Monzo will charge you.

Some cash machines may add a fee too for withdrawing money. Monzo recommends using machines that do not charge. To see what fees you’re likely to pay, launch the Monzo app and head to the Fees and Allowances section.

Monzo vs Starling Bank

Monzo and Starling Bank are smart banks. They allow payout via contactless card, Apple Pay, Google Pay, bank transfer to another Starling or Monzo bank account. Starling Bank is compatible with Fitbit Pay, Garmin Pay and PayPal, while Monzo is not.

ATM withdrawals in the UK are free on both Monzo and Starling Bank. But when you withdraw from a foreign ATM, it’s free up to £200, 3% thereafter. Starling Bank does not charge any fee for withdrawing from foreign ATMs.

Monzo offers overdrafts up to £3,000 and loans up to £15,000. Starling Bank gives loans and overdrafts up to £5,000. Both banks provide FSCS protection of up to 85,000 pounds.

Customer support is available via live chat, email and phone through the Monzo app and Starling Bank app. Monzo is purely focused on consumer banking, while Starling Bank is very technology led with sights set on banking as a service. As such, Monzo is community-focused and hip, while Starling Bank feels like a traditional bank.

Monzo stands out for its excellent customer service and better person to person payments.

Monzo Pros and Cons

Pros

  • Automatic saving
  • Loans and overdrafts
  • Good for budgeting
  • Easy account setup
  • Fee-free foreign ATM withdrawal

Cons

  • Available on the app only
  • Allows a maximum deposit of £1,000

Final Thoughts

Monzo is an excellent alternative to traditional banks. Using the app, you can track your spending, split bills, set limits for different categories and budget. The app will send instant notifications, travel reports and even warning alerts when you spend more. Every time you make a purchase, Monzo will round up the amount to the nearest pound. The balance goes to one of your Savings Pots.

Despite its many features, it has a few limitations. First, Monzo limits deposits to £1,000. Second, it charges ATM withdrawal fees when you take out cash over £200 from foreign ATMs. Third, the bank is available on the app only. There are no branches.

If you lose your phone, your phone battery ideas or the app has technical issues, you’re pretty much stuck. This means, you can not rely on Monzo as your only bank account. Other than that, Monzo is a great option to manage your spending and money.