Digital challenger bank Monzo has teamed up with Investec to launch its first interest-paying savings account, exclusively available to current account customers.
The Monzo Savings Pot is an easy-access account that pays 1% AER and can be opened with a minimum deposit of £1,000.
Which? looks at what you need to know about the new offer and how the new deal compares to other easy access accounts on the market.
What the Monzo Savings Pot offers
The Monzo Savings Pot pays 1% AER to savers with at least £1,000 to open an account and will be rolled out to users gradually.
You can open up to 10 Pots and interest is paid monthly.
The account is easy-access but it will take one working day to move your money from a Savings Pot back into your Monzo account.
Monzo’s non-interest paying Pots will still be available. This will still allow you to put aside smaller amounts of money and good if you need access to the money instantly.
Are your Monzo savings protected?
The money you save is held by Investec but you can manage your account through the Monzo app.
Monzo says there’s no upper limit to what you can save but bear in mind that only up to £85,000 will be protected by the Financial Services Compensation Scheme (FSCS).
The £85,000 limit applies to all the Monzo Savings Pots you open (you can open up to 10) as well as any deposits you have with Investec.
But the limit doesn’t include the money you have in your Monzo current account, so you could still have up to £85,000 in your Mozo current account and £85,000 across your Monzo Savings Pots/ Investec savings products.
How the Monzo Savings Pot compares
The rate on offer with Monzo’s Savings Pot can be beaten by a range of other easy-access accounts on the market.
The top deal right now is from Marcus by Goldman Sachs. It pays 1.5% AER for 12 months and can be opened with just a £1 deposit.
Here are best deals available right now.
Please note that the information in the table below is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the savings account provider before committing to any financial products.
|Savings account||Interest rate AER||Bonus rate AER||Interest paid||Minimum deposit|
|Marcus Online Savings Account||1.50%||0.15% for 12 months||Monthly||£1|
|Bank of Cyprus Online Easy Access Account||1.47%||0.47% for 12 months||Anniversary||£1|
|The Family Building Society Premium Saver||1.45%||None||Yearly||£5,000|
|Shawbrook Bank Easy Access||1.40%||None||Monthly||£1,000|
|Tesco Bank Internet Saver Account||1.40%||0.85% for 12 months||Yearly||£1|
|Charter Savings Bank Easy Access||1.40%||None||Monthly||£1,000|
|Sainsbury’s Bank Defined Access Saver||1.40%||None||Anniversary||£1|
Source: Which? Money Compare
Monzo’s rate is very middle of the road and the high £1,000 deposit level might exclude some savers with smaller deposits.
However, Monzo has told its community of followers that it has decided on this rate and deposit level to ensure it can lend to people in a responsible way.
The ‘loan to deposit ratio’ is important to make sure the challenger bank has enough money to lend to people with overdrafts.
How to get a Monzo savings account
The Monzo Savings Pots are gradually being rolled out.
If you have a Monzo account you should get an alert on your phone and/or an email telling you about the new deal.
You just need to head to the account tab on the Monzo app, tap on ‘create a pot’ and select the Savings Pot option.
To sign up for a Monzo account you will need to first download the Monzo app from the Apple app store or the Google Play store.
The Monzo current account offers analytics that helps you track your spending. It also offers fee-free spending overseas, and up to £200-a-month of fee-free overseas cash withdrawals.
- Find out more: challenger and mobile banks
What else has Monzo got planned?
Monzo now has more than one million customers and makes up 15% of all new bank accounts opened in the UK.
It recently raised £85m from US investors and has hit a landmark valuation of £1bn – making it the latest UK tech start-up to pass the ‘unicorn’ milestone, which is a term used to mark how rare such an occurrence is.
Monzo is unlike traditional high street banks as it invites users to help build the kind of bank they want to see, with a community forum that has 28,000 users.
Savings Pots is just another step towards Monzo’s vision of a marketplace bank that helps users access services and products from a range of providers.
Monzo says it is looking at partnering with other companies for its Savings Pots and will explore other products like fixed-term savings deals for those that don’t need instant access to their money and want to earn more interest.
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