When it comes to banking, today we have much more choice as to who looks after our money. But the biggest players are also providing us with incredible money management tools. Michael Bartons puts this market leader to the test in his Monzo review, to help you decide if it’s the bank for you.
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Spoiler alert! I don’t have a Monzo account, but my son and daughter-in-law do. They love it. Are they right in their conclusion? I decided to take a look and see if what they were telling me was true. I wanted to know if I should become a Monzo customer myself.
In this Monzo review, you will learn all you need to decide if a Monzo account would be best for you.
Monzo’s branchless, app-driven approach provides you with a modern, user-friendly experience. It can revolutionise your relationship with budgeting, spending, and saving. There’s a whole gamut of banking features for you to benefit from, and certainly more than most (if not all) traditional high street banks.
It’s easy to open an account, and you’ll find the app delivers a refreshingly clean experience. While there is a free account which is ideal for first-timers new to online banking, the paid-for accounts each offer a good step up in features and benefits.
We’ve got a feeling that once you log on to Monzo and use your account for the first time, you won’t look back.
Monzo – A Bank Without Branches
Monzo started life in 2016. Back then it was no more than a prepaid Mastercard. You could top up your balance via the Monzo app, and use the card to make free cash withdrawals. About as exciting as watching a kettle boil. Nothing different to what you could get from any bank card, really.
Even back then, though, it had the credentials that promised more. Its founders were Jason Bates, Tom Blomfield, Gary Dolman, Jonas Huckestein, and Paul Rippon – all ex-employees of Starling Bank. It wasn’t long before it had given birth to something of a cult following, and received authorisation from the FCA, together with a banking license, in 2017.
Today, Monzo is one of a group of challenger banks – smaller banks that are disrupting the traditional banking system and doing things differently. You can’t get much more different than being a bank with no branches. Its entire infrastructure is online, and to be a customer you’ll need a smartphone to manage your money.
When I first became aware of the growth in this type of bank, I have to admit I was sceptical. But, thinking about it, what is there to be sceptical about?
The majority of people in the UK have smartphones – you may even be reading this review on yours now. Most of us are now comfortable with mobile apps. You might play games on your phone, book hotel rooms and flights while on the go, have social media accounts, and keep in touch with your friends and family through WhatsApp.
Many of us also use the online banking apps provided by the high street banks. I very rarely use a bank branch now. I think I had to go into one about three years ago to get a new PINsentry device. Then it had to be posted to my home address.
Then a few months ago, I walked into a branch of my bank because I needed to withdraw more money than the ATM would allow. They didn’t have cash behind the cash counter. But the teller solved the problem for me. He walked me through how to change my cash withdrawal limit… on my banking app!
No branches? No bother!
Monzo : Low-Cost Banking with Lots of Features
Perhaps the most appealing thing about Monzo is just how much you can do on it, and how easy it makes managing your finances. This was incredibly important to my son, who, until the last few years, had not been great at managing his cash flow.
So, what can you do with a Monzo account? Here’s a list of the main features:
Budgeting, Saving, and Spending
When I pay myself, the first thing I do is sort my salary out into different ‘jars’ or ‘pots’. This separates my savings, necessary spending (utility bills, insurances, and so on), and what I have left over. It’s a manual process that requires me to make around a dozen transfers in total.
Monzo’s Salary Sorter lets you set up your pots and preferences. You then can sort your salary into them. Once you have done this, you can set it up to make these transactions automatically when your salary gets paid into your Monzo current account.
We all have unique savings goals, and usually several. With Monzo, you can set up several savings pots and transfer money into them either regularly or when you have the money available. (The best way is to budget to save by paying yourself first.)
Set up different pots for each savings goal you have – Christmas savings, saving for car insurance, holidays… whatever you wish to save for.
Similar to savings pots – set up your bills pots, and transfer money into them when your salary is paid into your account. Direct debits and standing orders will be separated, and you’ll never not have the money to pay them. The best part is that it can all be automated.
Here’s something a little different: Monzo Flex. This is a buy now pay later facility. Buy what you want today, and pay in instalments over 3, 6, or 12 months. Great for taking advantage of sales and managing your cashflow, but make sure you follow the buy now pay later rules.
Creating an effective budget is a key step to achieving your financial goals. Managing that budget effectively is crucial. Monzo has tools to help you set, manage, and monitor your budget, tracking how well you are doing on your monthly spending limits.
When we used to pay for everything in cash, I would put all my loose change in a pot each night. It was amazing how quick that could accumulate to a tidy sum. Now most spending is on card, we don’t do this. Instead, we spend every last penny.
Round Ups are Monzo’s way of helping you to save your change. It’s a simple idea. Each time you spend on your card, the bill is rounded to the next pound. The difference between this and the amount you actually spent is automatically transferred into a savings pot. Simple, effective, and automatic. You won’t miss the pennies, but you will be thankful for the pounds.
Have you ever been to a restaurant with friends or family, and then had that embarrassing end-of-meal ‘how are we going to pay?’ conversation. It’s not that none of you have the money, it’s that you all want to pay separately. The waiter is not a happy bunny.
With Monzo, all you need to do is pay on your Monzo card and split the bill through its ‘Shared Tabs’ facility. Great for settling a bill easily and tracking who owes what.
Get Paid Early
Back in the day when bank managers knew you by first name, it was possible to phone your bank manager and arrange a temporary overdraft for a few days before your salary hit your account. I did it several times. Now, “the computer says no”.
Enter Monzo’s ‘Get Paid Early’. You can have your salary credited to your account a day early. Perfect if you accidentally go overdrawn just before payday.
Mortgages, Loans, and Overdrafts
As a bank, Monzo can offer credit to its customers. How much you can borrow depends upon your personal circumstances, but Monzo can arrange overdrafts and provide personal loans of up to £25,000.
However, interest rates are high (for example, overdraft rates range from 19% to 39% EAR). If you need to borrow money, there are cheaper options available.
If you have a mortgage, you can connect your mortgage to Monzo and track how much you owe. This could help you to identify potential to overpay (saving you interest) as well as seeing your progress on debt repayment.
Using Monzo Abroad
Monzo is also a great choice if you travel abroad. My son and daughter-in-law only use this now when they take holidays in Europe. Here’s why:
- Great Foreign Exchange Rates
Monzo has partnered with Wise (of whom I am a big fan). You can send money internationally with no hidden fees. Wise also uses the Interbank rate to exchange between currencies – meaning you change your sterling for euros at the same rate at which the banks trade between each other.
- No Transaction Fees
You can use your Monzo card just as you would in the UK, and pay no transaction fees or exchange fee markups as you might with other cards.
- Free Cash Withdrawals While Abroad
It’s not always possible to pay by card when you’re abroad. Monzo allows you to withdraw cash free of charge from ATMs in the EEA and £200 per month elsewhere.
Saving with Monzo
Let’s look a little closer at how Monzo helps you to save.
There are four types of savings pots that you can use in Monzo:
1. Instant Access
Earn up to 3.40% interest and retain immediate access to your cash. There is no minimum deposit requirement with Monzo’s Instant Access accounts.
2. Easy Access
These accounts allow you to withdraw money with one business day’s notice. The minimum deposit is £10, and you’ll earn up to 3.45% interest in an account provided by Paragon.
3. Flexible Cash ISA
Earn interest tax-free, with interest rates of up to 3.05%. Like the Easy Access accounts, you can withdraw the following day. You can deposit from as little as £10 at any time. Monzo uses three providers to offer these accounts.
4. Fixed-Rate Savings
You can earn almost 5% in interest on Monzo’s range of Fixed-Rate Savings accounts, though you will be locking your money up for between 6 and 12 months. During this period, you cannot deposit or withdraw any money. A lump sum of at least £500 is required to open one of these accounts, which are offered via various third-party providers.
If you need to borrow money, Monzo offers a fast online application process with loans of up to £25,000 available. To assess your borrowing entitlement, Monzo asks three questions without affecting your credit rating. They promise that if accepted, your loan application:
- Will take only 5 minutes
- Will credit your account on the same day as the application is made
- Will incur no fees for early repayment
Interest payable depends upon your application and financial status, though tends to range between around 12% APR and 26% APR.
If you overspend in your Monzo account and go into the red, you’ll be charged no more than £15.50. Monzo says it will notify you before you fall into an overdraft, giving you until midnight to deposit funds and avoid an overdraft situation.
If you think you are likely to go overdrawn, it is always best to arrange an overdraft. Like applying for a Monzo loan, it’s an easy online process. The maximum overdraft is £2,000, but how much you can go overdrawn by depends on your credit score. Interest charged will range from 19% to 39%.
(Tip: If you need extra cash, consider applying for a Monzo loan instead of an overdraft. The interest rate is lower, and with no penalties to repay early, it could be a cheaper option for you – though you should always check the numbers before deciding.)
Buy now pay later deals (BNPL) can help you to manage your cashflow more effectively. They also give you the ability to buy something that is on sale today but will rise in price soon, even if you don’t have the cash now.
Here is how Monzo’s Flex works:
- Apply online for Monzo Flex. Monzo will run a soft credit check to assess eligibility. This won’t affect your credit score.
- If eligible, you’ll be pre-approved. You can now make the formal application, which results in a hard credit check. This will show on your credit file.
- You’ll have a credit limit set, based upon your credit score.
- You can choose to flex your payment between 3, 6, and 12 months.
- Interest is charged at 24% APR.
You can use Monzo Flex anytime you use your Monzo card, and even Flex purchases you have made in the previous two weeks.
Like other types of credit, you’ll need to ensure that you can afford the repayments. If you miss a payment, Monzo will provide a grace period of 7 days for you to make the payment. If you cannot do this, Monzo will attempt to take a smaller payment and lengthen the repayment time – resulting in more interest to pay over a longer period. If this happens, it will affect your credit score.
You can open individual and joint accounts in Monzo, providing you are a UK resident and over 16 (though if you live in the United States, you can also apply for a Monzo account).
There are three main accounts:
- Monzo Free
- Monzo Plus
- Monzo Premium
Here is the lowdown on these account options:
The starter account, with no monthly charge, but not short on features:
- Access to savings, borrowing, and overdrafts
- Money protected by the Financial Services Compensation Scheme (FSCS), which gives you assurance over £85,000 of money held with Monzo
- Fee-free UK bank transfers – you won’t pay a penny to transfer money to any other UK bank
- Bill Pots to put money aside for known, regular expenditure
- Savings Pots to set aside money for your savings goals
- Instant notifications to keep track of your spending in real time
- Spending categories to keep a track of how and where you are spending your money – great for developing budgeting discipline
- Apple Pay and Google Pay – spend using your phone
- Split Bills
For a subscription of £5 per month, you’ll get all the features available on the Monzo Free account, plus:
- See all your other bank accounts in Monzo – connect your accounts to have an overall view of your current financial situation
- Interest on your current account and bills pots – receive 1% AER on your current account, bills pots and instant access savings pots on balances up to £2,000
- Holographic card
- Virtual cards – to keep you safer when you spend online
- Custom categories ─ customise your spending categories to make them personal to you, and divide payments among categories if you wish
- Round ups to help you save extra
- Offers from a range of retailers
- Fee-free withdrawals abroad – up to £400 per month
- One free cash deposit per month
- Credit tracker – watch how your credit score changes
Monzo’s elite account, offering all the features of the Free and Plus accounts, and, for £15 per month, all of the following:
- Metal card exclusive to Monzo Premium account holders
- Phone insurance covering loss, damage, theft, and cracks
- Worldwide travel insurance that covers you and your family when travelling together
- Interest of 1.5% on your accounts up to a balance of £2,000 (instant access savings pots)
- Discounted airport lounge access, to help you and your guests travel in style
- Fee-free withdrawals abroad – up to £600 per month
- Five free cash deposits every month
In addition to these personal accounts, you can also open the following account types:
Monzo 16/17 Account
This account has been specifically designed for teenagers. It provides many of the features of an adult’s bank account, but with age-related spending stops. This teen account has the following key features:
- Contactless debit card
- Apple Pay and Google Pay
- Spending budgets
- Split Bills
- Fee-free spending abroad (with limits as per personal accounts)
- Spending notifications
There is no overdraft or borrowing facility with the 16/17 account.
Monzo Business Account
Monzo also offers business accounts that include:
- Free UK bank transfers
- Monzo pots – including spending, saving, and tax pots
- Web access as well as mobile access
- Integrated business tools
- Digital receipts and in-app invoicing
- Multi-user access
- Instant notifications
Open a Monzo business account, and you’ll receive 6 months of Xero (the accounting software) free.
How Do You Open a Monzo Account?
It’s easy to apply for a Monzo account. You’ll need to be 16 or older and a UK resident with a smartphone. Here are the steps to follow:
- Download the Monzo app onto your smartphone.
- Enter your email address.
- You’ll receive an email from Monzo with a link to verify your email address.
- Back on the Monzo app, enter you name, date of birth, address, and phone number.
- Next, you’ll receive an SMS with a verification code to enter into the app.
Now, Monzo’s back-office system will run anti-money laundering and credit checks. You will also need to upload photographic ID (like a driver’s license or passport) and video yourself using your phone speaking a message that Monzo asks you to convey.
When all your documents have been accepted and your application approved, you will receive your Monzo Mastercard through the post.
That’s it! You can now start to set up your budgeting categories, savings and bills pots, and more.
Fees and Charges on Monzo – What You Need to Know
Unless you are opening a paid-for account, there are no charges to open or manage a Monzo account. However, this doesn’t mean you won’t incur charges. For example, while all ATM cash withdrawals are free in the UK (though some specific exclusions may apply), if you withdraw more than £200 in a single month while abroad, you’ll be charged 3% on the amount over £200.
If you are a Monzo Free account holder, you’ll be charged to make cash deposits – and those charges can rack up if you are only depositing small amounts in PayPoints. £1 to make a deposit may seem like a paltry amount, but it’s 10% of £10, 2% of £5, and 1% of £100. Plus, you can only deposit £1,000 in any six-month period. Paid account holders have much more flexibility to make free-of-charge cash deposits.
Overdraft and loan charges are pretty hefty, so you should take care if you wish to borrow money: always compare Monzo’s offers with other options (and avoid borrowing if it is possible to do so).
If you lose your Monzo card, you will be charged £5 for a replacement.
To keep fees to a minimum, there are some simple ‘rules’ to follow:
- Pay in more than £500 each month – or have your state pension or benefits such as Universal credit paid into Monzo
- Have one or more active direct debits from your Monzo account
- Hold a joint account with anyone who does any of the above
- Be a Monzo Plus or Monzo Premium account holder
Is Your Money Safe with Monzo?
It’s natural to worry about being scammed when you are using online apps, especially financial apps. However, Monzo’s account opening processes – including two-step verification and video verification ─ are reassuringly rigorous. A scammer would need your photo ID and a made-to-measure facemask that makes them identical to you to fool Monzo’s systems.
Of greater concern is likely to be the safety of the money in your Monzo accounts. The good news is that, because Monzo is a UK bank and regulated by the FCA, it is obliged to do all it can to protect your money and treat all its customers fairly.
Also, your money is protected against unexpected events – like bankruptcy of Monzo – up to £85,000 or £170,000 for a joint account.
What Customers Think About Monzo
Monzo has a 4.2/5-star rating on Trustpilot, with 79% of reviewers giving a 5-star rating. Among these, a few headlines read as follows: ‘Haven’t looked back’, ‘Outstanding’, ‘Amazing bank’, ‘I love banking with Monzo’, ‘Monzo, modern bank’.
As for my son and daughter-in-law, here’s what they have to say about Monzo:
“It’s better than any bank account we’ve had before in the UK. It’s easy to open, and then the features like budgeting and saving make money management easier, too. We can see how we’ve been spending our money, which is good for identifying spending pitfalls, and the Round Up feature really helps us save without knowing it!
“Being able to run our bank account on our terms from our home – or anywhere we happen to be ─ is much better than wasting so much time queuing in a bank when all its staff have disappeared for lunch.”
Alternatives to Monzo
What if you don’t like the look of Monzo? It just may not be quite what you’re looking for. Fortunately, there are alternatives. Here are two we would also consider:
Revolut has a bunch of great features, and could be ideal if you are travelling abroad ─ it’s cheap and offers top exchange rates. It offers a lot of budgeting, spending, and saving and investment options, too.
However, Revolut doesn’t hold a UK banking license, so don’t expect it to replace your primary UK bank account. Its free account is also more limited than Monzo’s.
Monzo’s app is a little more friendly than Starling’s. For example, it will alert you when you are near to being overdrawn or you are about to break one of your budget limits. However, you’ll be paid interest on your account balances, and overdraft rates are a little cheaper overall.
Like Monzo and Revolut, you’ll benefit from no-fee spending abroad. You’ll also have access to a range of other financial services through its app.
The Bottom Line
Monzo may have started its life as a simple pre-paid card, but it has evolved into one of the most popular challenger banks in the UK.
Its appeal lies in the wide range of features it offers to make managing your finances easier. Whether you need help with budgeting and keeping on top of spending, saving more easily and effectively, or you want a card that you can use abroad with low or no fees, then Monzo could be what you are seeking.
On top of this, features such as Monzo Flex add more convenience to your cashflow management strategies.
However, you’ll need to decide which of the three account options – Free, Plus, or Premium – is best for your needs, and provides the features you need at an appropriate price point.
You should also be mindful of potential fees and charges, especially with overdrafts and loans, as they can be quite substantial. Comparing these offerings with other options is essential to make informed borrowing decisions.
In the final analysis, Monzo’s branchless, app-driven approach provides you with a modern, user-friendly experience. I’ve been watching my son’s approach to money over the last few years.
I firmly believe that Monzo has helped him to mature financially, and will continue to be a key part of his financial health for many years to come as it evolves its offering in line with the needs of its customers.