First launched as a popular prepaid Mastercard, online bank Monzo has recently announced that customers will have to switch to its current account if they want to keep using Monzo services.
The deadline for closing all prepaid accounts is early April. All existing Monzo customers will have already been invited to make the switch, and new customers will only have the option of opening a current account.
How do you get a Monzo current account?
If you already have a Monzo prepaid account, you can upgrade through the app. The video below shows you how.
Monzo will send you a new card in the post. You’ll no longer be able to use your old prepaid card.
If you don’t have a Monzo account, you just need to download the app and go through the guided application process. There is no longer an option for new customers to sign up for a prepaid card account.
Will I need a credit check?
Monzo will run a ‘soft credit check’ on you when you open the account, which won’t affect your credit score
If you apply for an overdraft then you will need to have a hard credit check, which will register on your score. At the time of writing, this feature is yet to be rolled out – but you can register your interest through the app.
What does Monzo’s current account offer?
If you’re upgrading from the prepaid account, you’ll gain your own account number, sort code and have your name on the card.
This means you can use the account for your salary, direct debits and organise bank transfers to other banks.
The current account also has FSCS protection up to £85,000, so your money is fully covered if Monzo goes bust.
Alternatively, you can treat the Monzo current account in the same way as your prepaid card. The budgeting and spending breakdowns are still available, you’ll get instant spending notifications and spending insights and you can still top up or transfer from another bank account.
The current account also has the additional Pots feature. This enables you to set money aside within your Monzo account for specific things, rather than having all of your savings together in one account. You can create up to ten ‘pots’, give them a name and an image, and transfer money into them whenever you like.
How does Monzo’s current account compare?
One downside of banking with Monzo is its 0% interest rate and lack of incentives and perks.
Current account deals available from high street banks include the Nationwide FlexDirect account, which offers 5% interest. Alternatively, Santander’s 123 account gives up to 3% cashback on household bills paid by direct debit and 1.5% interest. TSB, meanwhile, offers an account with 3% interest paid monthly on balances up to £1,500, with cashback bonuses also available.
With Monzo, there are also no options to add-on the likes of travel insurance, mobile phone cover or car breakdown cover, which many high street banks offer as part of a packaged deal. Keep in mind, though, that these packaged accounts are generally only worthwhile if you fully use the benefits.
- Find out more: Best bank accounts if you always stay in credit
‘Challenger banks’ similar to Monzo
Many of Monzo’s innovative budgeting features aren’t available with more traditional banks.
Monzo also doesn’t charge any fees to pay with your card abroad or make online transactions in a foreign currency. ATM withdrawals are also free up to £200 a month (withdrawals above this are charged at 3%).
But there are other challenger and mobile banks, such as Starling, that offer similar services to Monzo.
As an example, Starling offers a full current account with a small amount of interest, instant notifications, no fees for overseas spending or cash withdrawals and an overdraft of up to £5,000.
If you want to continue to use a prepaid card, Revolut offers ATM withdrawals of up to £200 a month, free bank transfers in 26 currencies and no fees on spending abroad in 120 currencies. You can also opt for greater limits with its Premium card, which costs £6.99 a month.
- Find out more: See our full Monzo bank review, along with other Challenger and mobile banks
What happens if you don’t upgrade?
Once Monzo shuts the prepaid card programme, you will no longer be able to use your card.
There should be further reminders about the deadline in the coming months, along with advice on how to switch.
If you choose not to upgrade and still have money left in the account, this will be returned to you. Details on how this transfer will work are yet to be released.