Monzo launches UK’s first auto-investing credit card – is it any good?

Monzo has launched Monzo Aura, the UK’s first credit card that automatically invests its cashback into the stock market on your behalf.

Other perks include a subscription to Apple TV, Google AI Plus with two terabytes of cloud storage, and access to two airport lounge passes and two airport fast-track passes each year.

However, with a monthly fee of £15, Monzo’s new metallic credit card is an expensive proposition compared to rival cashback cards.

Read on to find out more about the perks offered, plus how it stacks up against the best alternatives.

What does the Monzo Aura credit card offer?

A cashback credit card is a type of reward card that pays you back a percentage of what you spend. With Monzo’s new card, you can choose to have that money paid into a range of investment options instead of getting it paid onto your credit card.

The main features of Monzo's new card are:

• 1% cashback on groceries, with no cap.
• 0.5% on everything else, also uncapped.
• The option to have your cashback auto-invested into a range of fee-free Monzo investments.
• A free subscription to Apple TV.
• Google AI Plus with two terabytes of cloud storage, which can be shared with up to five family members.
• Access to two airport lounge passes and two airport fast-track passes each year.
• A £15 monthly fee (£180 per year), with a three-month minimum term.

Monzo's latest offer also comes with a credit limit of up to £15,000 (subject to eligibility), and 0% interest over three months for purchases over £100. However, this 0% offer only applies when you put an eligible purchase of £100 or more onto a three-month repayment plan and make the required monthly repayments; it doesn't mean you can make no repayments for three months. Missing a payment could mean losing the 0% rate on existing purchases, as well as affecting your access to benefits and your credit score. 

The card's monthly fee means it has a representative APR of 64.2% (variable), which is substantially higher than some of the market-leading cashback cards (see below). The purchase rate (the rate applied to purchases if you do not pay off your balance in full each month or opt for a 0% plan) is 29% p.a. (variable), which is more in line with the competition.

However, cashback cards generally work best when you pay off the balance in full each month, as interest charges can quickly outweigh any rewards earned.

To apply for the card, you'll need to be at least 18 years old, a UK resident, and an existing Monzo customer. Applications are subject to credit profile, status and affordability checks.

• Find out more: best credit card deals

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How does Aura's investment feature work?

With Aura, spending £400 on groceries each month earns you £4 in cashback. Spending £400 on anything else would earn you £2 each month. Cardholders can then choose to invest the money.

Although there is no fee for investing your cashback through Monzo’s platform, you will be subject to annual management fees for any investment funds you pick. These are ongoing fees charged by fund managers – usually a percentage of the total value of your investments.

According to Monzo, customers will be able to invest in a range of ETFs including the FTSE 100, S&P 500, Nasdaq, as well as exchange-traded commodities (ETCs) in gold and silver. Customers pay an investment management fee to BlackRock. This comes out of the value of the investment, so customers won’t see it as a separate charge.

As with all investments, the value could go up or down, and you could get back less than you put in.

In an exclusive interview with Which?, Monzo's general manager of borrowing, Luke Enock, told us he was aware of the need to clearly explain the risks to customers new to investing.

‘We've tried to design this perfectly for customers who are new to investing, but also for those customers that are a bit more experienced,’ said Enock.

‘Each of the funds come with that kind of really simple language that we try to make sure we do with all our design.

‘We provide explanations of the level of risk associated with each of our investment options in the form of a risk score.’

• Find out more: should you invest in funds?

How does the Monzo Aura credit card compare?

Monzo’s new metal credit card faces stiff competition.

The American Express Cashback Credit Card offers some of the highest cashback rates on the market, with an attractive 5% for the first three months up to £125, dropping to 0.75% cashback on spending up to £10,000 from month four. The annual fee is much lower too, coming in at £25 compared to Monzo’s £180. It has a representative APR of 34.6% (variable) and a purchase rate of 29.1% p.a. (variable).

The American Express Everyday Cashback Credit Card has no annual fee and offers 5% cashback for the first five months, up to £125 (minimum spend of £3,000 per year). From month six, you earn 0.5% cashback on spending up to £10,000. It has a representative APR of 29.1% (variable) and a purchase rate of 29.1% p.a. (variable).

Santander’s Rewards Credit Card also has no annual fees and pays up to 3% cashback on everyday travel, eating out and takeaways for the first 12 months (0.25% thereafter). It has a representative APR of 24.9% (variable), and a purchase rate of 24.9% p.a. (variable).

However, Monzo’s mix of subscription and airport perks, which the company says is worth over £360 per year, may sway it for some customers.

• Find out more: best cashback and reward credit cards