Monzo introduce new fees for some banking customers

2 September 2020   By Dr Lucy Brown, Editor

Some Monzo customers will pay for cash withdrawals and replacement cards from 31 October 2020 under new rules.

There will be a £250 cap on free cash withdrawals per month across the UK and European Economic Area (EEA), with customers charged 3% for withdrawals above this level.

Some customers will also be charged £5 for card replacements in the UK unless the card is stolen, expires or the customer is a victim of fraud.

Monzo say 79% of customers won't be affected by these changes.

monzo bank card

Increased fees for some

Monzo has created a two-tier system for their customers, where those who use Monzo as a main bank don't need to subsidise those who use it as a supplementary account.

So, customers who don't use Monzo as their main account will pay a 3% fee on withdrawals over £250 every month, and they will pay £5 per replacement card - unless the card has expired or they're a victim of theft or fraud.

The 79% of customers who use Monzo as their main bank won't have to pay any additional fees on their UK and EEA withdrawals, and they will receive two free card replacements in the UK per year with £5 per subsequent replacement.

Vulnerable customers can be refunded or exempted from the fees if they speak to Monzo directly, although the criteria for being 'in difficulty' is not made clear.

Why are Monzo changing the rules?

Monzo point to the fact that they are charged by the companies running cash machines every time a customer withdrawals cash, and that 20% of customers currently make up over 80% of those costs.

They say it's fairer for those customers who hold another main bank account, and so could access cash for free from their other provider, to contribute towards the costs if they choose to use their Monzo account instead.

On replacement cards, Monzo highlight that 1% of their customers order more than one replacement card every year, accounting for 35% of their total replacement costs.

Monzo calculate 79% of their customers wouldn't need to pay the new fees based on how they used their account in the last year.

If a customer does any of the following, they are categorised as using Monzo for their main bank account:

  • Paying in at least £500 every 35 days and having at least one active Direct Debit payment on that account
  • Receiving a Department for Work and Pensions or Department for Communities' payment into the account every 35 days
  • Getting a student loan paid into the account every eight months
  • Sharing a Monzo Joint Account with someone who does any of the above

In addition, any customers signed up to Monzo Plus for £5 per month will be exempt however they use their account - Monzo say paying for the account demonstrates the bank is an important part of the customer's financial life.

What's going on at Monzo?

The backdrop to these changes is that Monzo is losing money - their losses doubled in 2019/20 to £113.8m and the coronavirus pandemic has led to them preparing for further losses.

It's important to say the bank isn't necessarily in trouble and that all deposits of up to £85,000 are covered under the Financial Services Compensation Scheme (FSCS) anyway.

Yet while they have been named as the brand customers are most likely to recommend to others in the YouGov 2019 BrandIndex and took two top spots in the service quality rankings reported to the Competition and Markets Authority (CMA) last month, making a profit seems to be difficult for the bank.

In our guide to mobile only banks, we explain that some customers use both traditional banks and digital only banks in conjunction with each other - Monzo are now trying to nudge customers into using them as a main bank rather than a supplementary one.

Searching for a new current account provider? Filter results by mobile only banks in our comparison checker to only see accounts from the likes of Monzo and Starling Bank.

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