Popular digital bank Monzo has today announced the launch of its first ever instant-access savings account.The competitive interest rate of 3 per cent
Popular digital bank Monzo has today announced the launch of its first ever instant-access savings account.
The competitive interest rate of 3 per cent matches JP Morgan backed digital bank, Chase, which upped its easy-access linked savings deal from 2.7 per cent to 3 per cent on Monday.
It also follows the decision earlier this month by new challenger bank, Kroo, which raised the in-credit interest on its current account from 2 per cent to 3.03 per cent.
Interesting: Monzo has launched its first ever easy-access savings deal, paying a competitive 3% interest. Up until now, its savings marketplace was provided by other banks
Similar to Chase and Kroo, savers will need to be a Monzo banking customer to be able to benefit. Monzo customers can open the account without having to deposit anything and can save up to a maximum of £100,000.
Deposits with Monzo are protected by The Financial Services Compensation Scheme (FSCS) up to a value of £85,000 per person.
Someone depositing £10,000 in Monzo’s instant-access account could expect to earn £300 in interest after year – if the rate remains unchanged.
Although Monzo currently offers savings products on its app-based marketplace, including easy-access, fixed rates and cash Isa deals, these are provided by other banks.
The new 3 per cent instant-access deal is therefore the first its kind that Monzo has launched alone.
TS Anil, chief executive at Monzo said: ‘We’re thrilled to bring our first instant access savings product to market. Developed with customers, it’s designed to give everyone the flexibility to grow their money and access it whenever they need to.
‘We’re excited to get this into the hands of customers who we know are using Monzo’s powerful saving and budgeting features more than ever to make the most of every penny.
‘Our mission is to make money work for everyone – and amid the cost of living crisis our ambition is to make money work even harder.’
Big player: Monzo was founded in 2015 and claims to be the UK’s largest digital bank with over 7million customers, adding 150,000 new ones every month
Non-Monzo customers can still benefit from this deal, but they will need to open a bank account with Monzo first.
This is a simple process. It requires downloading the Monzo mobile app and setting up an account, which includes an identity check.
There are three types of personal current account to choose from: the standard free account; the £5 a month Monzo Plus; or the £15 Monzo Premium.
For those setting up purely to take advantage of the 3 per cent rate linked savings rate, the free standard Monzo account will probably make most sense.
Monzo, Chase or Kroo?
As online-only banks go, Monzo has the longest history and most members.
It was founded in 2015 and claims to be the UK’s largest digital bank with more than 7 million customers, adding 150,000 new ones every month.
Chase currently serves more than one million UK banking customers having launched here in September 2021.
But it also has 56million digital customers in the US, and its parent company JPMorgan manages trillions of pounds of assets.
Although founded back in 2016, Kroo is very much the new kid on the block, having launched its current account at the end of last year after being granted a full UK banking licence.
All three banks offer free current accounts, although Monzo offers two premium alternatives which come with added features such as travel and phone insurance.
Monzo prides itself on instant spending notifications and also breaks down what its customers are spending their money on into categories such as transport, groceries and eating out.
It also doesn’t charge a fee when using its card abroad.
Its mobile banking app has more than 5 million downloads on Google Play and has a 4.1 star rating from roughly 101,000 reviews. It is also has a 4.6 star rating on the Apple app store.
TS Anil, chief executive of Monzo says: ‘Our mission is to make money work for everyone – and amid the cost of living crisis our ambition is to make money work even harder.’
Chase offers a wider range of features. Most notably, it is offering 1 per cent cashback on spending for the first 12 months. This is more generous than most cashback credit cards.
And yesterday, it announced it is extending the offer for an additional 12 months to all existing customers after the expiry of their initial offer.
It means that someone spending £15,000 on its card over the course of one year could receive up to £150 in cashback, although there are exceptions.
Chase also offers a fee-free debit card abroad, including for cash withdrawals.
It also offers an automatic regular savings function that allows customers to round up their spare change to the nearest £1, with a 5 per cent interest rate boost.
Chasing customers: The bank has attracted more than 1million Britons in its first year in the UK
Finally, Chase will introduce a 1 per cent in-credit interest rate on its current accounts for all new and existing customers, which is set to start in April.
The Chase UK app has been downloaded more than 500,000 times on the Google play app store with a a 4.1 star rating out of 5.
It also has a 4.9 star rating out of 5 on the Apple app store from roughly 96,000 reviews.
One of Kroo’s features is that it allows its customers to spend, track and settle up with their friends with the tap of just a few buttons in the app.
This means its customers can create groups with friends, and let Kroo calculate who owes what.
Like Monzo and Chase, it does not charge a fee when using its debit card abroad.
And similar to Monzo, it provides instant spending notifications and will also break down what its customers are spending their money on into categories.
This can potentially help people to better understand their spending habits and budget accordingly.
Kroo will also likely appeal to the more environmentally-minded banking customer. The bank says it will plant two trees for every current account opened, through its charity partner, One Tree Planted.
Join the Kroo? The digital challenger bank has increased its current account interest rates to 3.03 per cent on balances up to £85,000
Kroo’s app has a 4.3 star rating on Google play and a 4.7 star rating with Apple from over 2,000 reviews collectively.
A word of warning, though – with demand currently high, there are reports of long wait times for Kroo’s current account application.
How does Monzo’s deal compare with the market?
Its 3 per cent rate sits well ahead of what most savers are earning from easy-access savings across the market.
As of today, the average easy-access savings account pays 1.8 per cent, according to Moneyfacts.
In terms of the highest rates on the market, Monzo is up there amongst the best deals.
Yorkshire Building Society is the best buy paying 3.35 per cent, but only on balances up to £5,000.
Any cash held above £5,000 will earn a rate of 2.85 per cent.
However, Yorkshire BS only allows two withdrawals per year from the account without loss of any interest, with the year mark set on the anniversary of the account opening.
Anyone who wants a savings account they can dip in and out of more often might consider Shawbrook’s Online Easy Access account pays 3.01 per cent, while Tandem pays 3.05 per cent on its app account, including a 0.2 percentage point bonus for a year.
You can also earn 3.1 per cent with Paragon Bank online, but you can only make three withdrawals a year.
Others pushing the 3 per cent mark include Atom, along with Saffron BS and Secure Trust online — all offering 2.95 per cent.