What is Monzo and is it a bank?
Monzo started life in 2016 as a prepaid Mastercard that could be topped up via its app and used to make free withdrawals abroad. The brand was founded by Tom Blomfield, Jonas Huckestein, Jason Bates, Paul Rippon and Gary Dolman, who all previously worked at rival Starling Bank*.
It built up a strong following and transformed into a fully-fledged banking brand after getting authorisation from the Financial Conduct Authority (FCA) in 2017 and launching a current account. Its prepaid card then closed, with users upgraded to its current account service.
Monzo markets itself as a bank that lives on your smartphone and now has more than 8 million customers using its debit card to both manage their money and spend around the world.
- Salary Sorter - Sort your salary when you get paid into spending, saving and bills
- Spending budgets - Set spending budgets to control spending for different categories such as eating out and tracking how well you are doing for the month
- Savings pots - Create multiple pots to separate your money and save for goals. You can also set up automatic saving where spare change is rounded up and saved to one of your pots
- Investment pots - Pick from three different investment funds and start investing with just £1
- Bills pots - Manage your direct debits and standing orders from a bills pot
- Instant spending notifications - Instant notifications when spending to see what's leaving your account in real-time
- Free cash withdrawals abroad - Fee-free cash withdrawals in the European Economic Area (EEA) and up to £200 per month elsewhere on the free plan - a 3% fee thereafter (limits may vary as explained here)
- No transaction fees - Spend abroad for free with no additional charges added or an exchange rate markup fee
- Joint accounts - Set up a joint account with another Monzo account holder
- Overdraft - Set up an arranged overdraft with Monzo. The amount you can borrow will vary depending on your credit file and you will be charged a variable rate of 19%, 29% or 39% EAR
- Loans - Get a loan up to £25,000 with Monzo
- Monzo Flex- Monzo has introduced the ability to buy now, pay later in 3, 6 or 12 instalments with Monzo Flex
- Get paid early - A feature that allows Monzo customers to be paid their salary or student loan a day early. Click here for more information.
- Cashback - Activate cashback offers through the app to earn between 2% to 10% cashback with select retailers
- Shared tabs - Split multiple bills and payments between friends and easily keep track of who owes what
- International transfers - Monzo has partnered with Wise* so you can send money internationally with no hidden fees
- Apple/Google Pay - Pay with your Monzo card on Apple/Google Pay
- Track your mortgage - Monzo users can now track their mortgage in Monzo and see the monthly repayment amount and the total amount owed on the mortgage (Monzo connects to your Transunion credit file to find this information)
How does Monzo work?
Monzo currently offers a range of accounts, including personal, joint and business accounts.
Monzo offers all the usual current account services such as receiving your salary, setting up direct debits, standing orders, withdrawing cash with a contactless Mastercard and transferring money. But it also lets you manage your money as well as just hold it.
Monzo also prides itself on user feedback and has a busy online forum where users can raise concerns or suggest new features. If you decide to use Monzo then make sure you read the forums, as it will help you get the best from the product. Being able to influence the development of your bank makes a refreshing change.
How do I apply for a Monzo account?
You need to be a UK resident to get a Monzo card but it is working on offering additional international accounts in the future. If you live in the USA you can also sign up for a Monzo account. At present, you need to be age 16 or over to get a card, which may also be lowered in the future.
There are no Monzo branches. The only way to get a Monzo current account is through your smartphone. You will need to download the app on either an Apple or Android device. The first piece of information you need to enter is your email. Monzo will then send you an email so you can verify your account, which sends you back to the app to enter your name and date of birth, address and phone number. You will receive a text message with a verification code from Monzo once you have entered your number.
The app then uses Monzo’s back-office anti-money laundering and credit reference systems to verify your identity and you will also need to provide a photo ID, such as a driver's licence or passport, plus a five-second selfie video of yourself delivering a message it suggests.
These documents are uploaded, and if approved it will ask where to send your new contactless Mastercard and you can also immediately set up your PIN. You are then officially part of the Monzo revolution and can start setting up your spending alerts and budgeting.
You can open both personal and joint accounts with Monzo. If you wish to open a Joint Monzo bank account, both account holders need to have a Monzo current account first. If you already have a joint account and wish to swap over to a Monzo joint account you can do so using the Current Account Switching Service (CASS).
In the below comparison table, we compare Monzo's personal accounts.
|UK current account
|Fee-free spending abroad
|Instant spending notifications
|Other bank accounts in Monzo
|Fee-free withdrawals within UK and EEA (3% charge thereafter)
|£400 or Unlimited^
|Fee-free withdrawals abroad (3% charge thereafter)
|Interest on Personal Instant Access pot (up to £100,000)
|Free monthly cash deposits (at Paypoints across the UK)
|Round up spending
|Discounted airport lounge access
^You get unlimited fee-free withdrawals in the UK and EEA if you use Monzo as your main bank account rather than a spending card.
Monzo 16-17 account
Monzo has an account specifically for teenagers that gives them all of the freedom of an adult bank account with blocks on age-related spending. The key features of the Monzo 'teen' account are listed below:
- Contactless Mastercard debit card
- Apple/Google Pay
- Spending notifications
- Spending budgets
- Split bills
- Fee-free spending abroad (the same limits apply as the personal account)
- No overdraft
Monzo Business account
After months of testing, Monzo's Business account was open to everyone in early 2020. Below are the key features the Monzo business bank account offers, but for a more in-depth look at Monzo's Business account, read our independent Monzo Business bank account review.
- Free instant UK bank transfers
- Instant notifications
- Monzo pots
- Mobile and web access
- Additional integrated business tools
- Digital receipts and in-app invoicing
- 2 account options, Pro a paid-for option at £5 per month or Lite a free business account
Saving with Monzo
As well as budgeting and money management, Monzo also allows you to save your money. You can set up various “Regular Pots” to transfer money into and build up a fund towards set savings goals. Monzo also has a feature that means you can automatically add the change from payments made on your debit card into one of your regular pots by rounding up your spending to the nearest pound. These specific pots don't earn any interest, however, Monzo has four types of savings pots:
- Instant Access Savings Pot
- Easy Access Savings Pot
- Easy Access Cash ISA
- Fixed Term Savings Pot
The Instant Access Savings Pot allows you to earn up to 4.10% interest and withdraw your money instantly. You don't need a minimum deposit to open this account and the account is provided by Monzo.
The Easy Access Savings Pot allows you to earn up to 4.58% interest and withdraw the money the next working day. To open one of these pots you need a minimum of £10 deposit. This account is provided by Shawbrook.
The Easy Access Cash ISA offers a savings rate of up to 3.85% and the ability to withdraw the money the next working day. You can add money any time and open with a minimum deposit of £10. There are three accounts to choose from with varying interest rates and providers.
The Fixed Savings Pots allow you to earn up to 4.75% in interest but there are limitations on when you can access the money. The earliest is 6 months after depositing the money and the longest is 12 months in which you are unable to add or withdraw any money to the pot. To open a fixed savings pot you need a minimum of £500. You can choose between three different providers with varying interest rates.
If you have a Monzo Plus or Premium subscription plan you can also benefit from an exclusive Instant Access account that pays 4.60% Variable interest on balances up to £100,000. There's no minimum deposit and the account is provided by Monzo.
Borrowing with Monzo
Monzo offers several borrowing features depending on your needs.
Account holders can apply for an overdraft, but can currently only borrow a maximum of £2,000. You will be charged a rate of 19%, 29% or 39% EAR depending on your credit score, but you can check this via the Monzo app before completing the overdraft request. If you don't have an arranged overdraft but happen to go into an unarranged overdraft by mistake, the charges will be capped at £15.50 per month. Monzo says it will always notify its customers before they go into their overdraft and you have until midnight to add money into your account.
Monzo offers loans to everyone who is eligible and users can apply for a loan via the app. Monzo asks you three questions to determine your borrowing amount without affecting your credit rating. Monzo promises transparency and more control with less hassle.
Monzo loan benefits:
- 5-minute application
- Receive the loan on the same day as you apply
- No fees for paying off your loan early
- 24/7 chat or phone support
- 14.8% APR on loans between £10,000 and £25,000
- 26.9% APR on loans up to £10,000
It is worth remembering that, as with all loans, the APR is a representative example and may not be the exact rate that you are offered. Monzo says that you are able to find out your personal rate before you apply.
Monzo loans are only currently available on personal current accounts.
Monzo Flex gives customers the ability to spread the cost of purchases over a series of months; 3 months can be interest-free and 6 to 12 months will be charged at a variable interest rate of 29% APR. Monzo will run an eligibility check in the form of a soft search, to see if you can be pre-approved for credit. If you choose to apply for Monzo Flex, a hard credit search will then appear on your credit file and if you miss a payment, your credit score will be affected in the same way as any other loan or credit product. Once you apply you will have a set credit limit which is likely to vary depending on your credit score and you can choose to flex as many payments as you wish as long as it remains within your credit limit.
Monzo Flex can be used wherever you spend with your Monzo card. There is also the ability to 'Flex' any purchases you made in the last 2 weeks. You will not be charged any early repayment fees if you decide to pay the amount off before your instalment plan ends and there is also the ability to edit your instalment plan to pay it over a longer period of time, should you need to. If you miss a Monzo Flex instalment you will have 7 days to make a payment, if you have not paid within 7 days Monzo will try to take a smaller amount and switch you to a longer instalment plan. If Monzo is still unable to take payment it will be reported to the relevant credit reference agencies which is likely to negatively impact your credit score.
For more information on Monzo Flex, read our 'Monzo Flex review'.
Investing with Monzo
Monzo recently introduced its investing feature allowing users to pick from three different funds. You can pick a fund based on the level of risk you're comfortable with as an investor. The funds include:
- The "Careful" fund: Approximately 80% of your money is invested in bonds, while 20% is invested in shares.
- The "Balanced" fund: About 34% of your money is allocated to bonds, while 66% is invested in shares.
- The "Adventurous" fund: 100% of your funds will be allocated to shares.
You can start investing with £1 and you can choose between a Stocks and Shares ISA or a general investment account.
Monzo's investment funds are managed by BlackRock. You'll pay a 0.59% fee, which is made up of a 0.14% fund fee and 0.45% platform fee. If you're a Plus or Premium member, you'll qualify for a lower platform fee of 0.35%.
Is Monzo safe to use?
Monzo is fully regulated by the FCA, so like any bank, it has to protect client funds and treat customers fairly. You also get the right to complain to the Financial Ombudsman Service if you are unhappy with how Monzo deals with any issues you raise. You also benefit from Financial Services Compensation Scheme protection on up to £85,000 of your money in a Monzo account, if it goes bust. This limit raises to £170,000 on a joint account.
It would be hard for a scammer to set up a Monzo account on your behalf as they would need to have access to your email and phone to start opening the account. They would also need to complete the two-step verification process which requires having your passport or photo-card driving license plus also providing a selfie video message, which would be hard to fake.
Monzo fees and charges
There are no charges for opening or running a Monzo current account. Payments in the UK, cash withdrawals in the UK (exclusions apply) and payments abroad are all free – other than the Mastercard standard exchange rate - with no added fees. You can deposit cash with Monzo at any PayPoint location across the UK, but you will be charged a £1 fee. For example, if you deposit £10, only £9 will reach your bank account. Monzo only allows you to deposit between £5-£300 at any one time and a maximum of £1,000 every 6 months. This reduces to £500 every 6 months if you are 16 or 17 years old.
Monzo uses Wise* (formerly known as Transferwise) for international payments, which prides itself on being more transparent and cheaper than banks. For example, to transfer £10 into Euros it costs £0.29 in transaction fees which means Wise will convert £9.71 into Euros. Therefore at the current 2 hour guaranteed rate of 1.1689 (on 16/02/2024) the recipient receives €11.35. On the Wise site you can compare the cost to other banks, and in this case it admits it isn't always cheaper than some of the other banks as they don't charge a transfer fee.
If you are withdrawing cash abroad you will only be charged a 3% fee outside the EEA once you take out more than £200 in a 30-day period (the withdrawal limits are higher for premium accounts). For the majority, the only time you may incur a fee in the UK is if you have a Monzo overdraft and if you have an arranged overdraft you will be charged a variable rate of 19%, 29% or 39% EAR. However, in October 2020 Monzo introduced additional fees for some users, details of which are highlighted below.
Monzo customers who use Monzo as a spending card rather than their main bank account may incur further fees. These include:
- 3% fee if you withdraw more than £400 in 30 days in the UK or EEA
- £5 fee for replacement cards due to loss
The fee changes primarily affect Monzo users that do not use Monzo as their main bank account or those that withdraw lots of cash or regularly lose their bank cards. If you do any of the following, it is unlikely you will be charged:
- Pay in at least £500 every 35 days and have at least one active direct debit from the account
- Have a Department for Work and Pensions or Communities payment such as universal credit or state pension paid into Monzo every 35 days
- Have your student loan paid into a Monzo account every 8 months
- Share a joint Monzo account with anyone who does any of the above
- A Monzo Plus account holder
Monzo Bank Customer Reviews
The bank has a strong following and is rated as 'Great' on Trustpilot with 3.9 out of 5.0 stars, with over 30,000 reviews. Most of its reviews, 77%, rate the challenger bank as excellent, citing a good user experience and helpful budgeting features. However, 14% of reviewers rate it as bad, citing poor experiences with its live chat customer service and issues with accounts being closed.
Alternatives to Monzo
Here is a quick overview of some Monzo alternatives you may wish to consider.
Monzo vs Revolut
There are a few challengers to Monzo’s banking app crown. Revolut offers free card transactions in 120 countries, fee-free transfers at the interbank rate in over 30 currencies and free ATM withdrawals up to £200 a month followed by a 2% fee, which is slightly cheaper than Monzo. You can also buy Bitcoin, Litecoin and Ethereum cryptocurrencies through the Revolut app. Its Lifestyle feature offers a range of tools including the recently launched eSIM global service. It has a basic free package as well as £3.99, £7.99, £14.99 or £45 monthly packages offering extras such as higher withdrawal limits, overseas medical insurance and concierge services.
More information on Revolut can be found in our Revolut review.
Monzo vs Starling Bank
Starling* is probably Monzo’s closest rival. It lets you set savings goals and even offers 3.25% interest on your current account balance on balances up to £5,000. Starling also offers an in-app Marketplace so users can access other financial services and you can apply for a bigger overdraft than you can with Monzo. It was slightly ahead for entrepreneurs as it offered a business account long before Monzo, however, Monzo finally released its business account in early 2020.
Monzo’s app is slightly more intuitive and will inform you when your spending is getting too close to a set budget.
More information on Starling Bank can be found in our Starling Bank review.
Monzo pros & cons
Here is a quick overview of Monzo's main pros and cons.
- Easy to set up
- Good for budgeting
- Fee-free spending abroad
- Automatic saving
- Overdraft and Loans
- Competitive saving interest rates
- Daily withdrawal and spending limits
- App-only - requires internet and no bank branches
- £1 fee for depositing cash at a local PayPoint
- Can only deposit a maximum of £1,000 cash every 6 months (£500 if you are 16-17)
Monzo has become one of the leading challenger brands and app-only banks. Its app is simple to use and has great functionality but it does suffer from occasional technical issues and bugs. Despite its past teething issues, Monzo appears to be upfront with its customers and updates them regularly through its website blog and app.
Monzo's budgeting features offer great insight into your spending and help you to analyse where your money goes each month. In addition, due to the cost of living crisis, Monzo has also made some of its budgeting features accessible to all accounts, meaning those without a Monzo subscription can also benefit from its main budgeting features.
Monzo has recently also introduced its cashback and investment features, allowing customers to earn cashback on select purchases and start investing with Monzo.
Overall Monzo is a handy app that makes banking far more friendly, understandable and approachable.
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