We take a closer look at two of the “challenger banks” making waves in digital finance: Starling and Monzo.
There are a number of reasons people are turning away from high street banks and towards mobile ones like Monzo and Starling. Many of them act as personal finance assistants, giving you intelligent reports and insights into your spending habits. On top of that, many of these digital banks offer fee free spending abroad, visually appealing graphics and real-time spending notifications. So, there’s no waiting about for contactless payments to show up in your account.
Here we cover two of the biggest players in banking apps, Starling and Monzo.
Starling or Monzo – side by side comparison
|Fees and charges||Free||Free|
|Delivery speed||Between 3-5 working days||Between 2-7 working days|
|Payments||Pay via bank transfer or using PayPal or Google Nearby||Pay via bank transfer or send instantly to other Monzo account|
|UK ATM withdrawals||Free||Free|
|Spending insights||Insights lets you compare spending between different merchants||Spending tracker provides a breakown of how much you've spent and where|
|Categories||10+ categories||10+ categories, regularly updated|
|Direct debits||Yes - future Direct Debits shown as alerts||Yes - future payments shown in homefeed|
|Top up||Via bank transfer, standing order, or have salary paid in||Via bank transfer, standing order, or have salary paid in|
|Freeze your card||Yes: touch of a button in app||Yes: touch of a button in app|
|Alerts||Real time notifications about any account activity. Starling alerts you if you have insufficient funds to cover direct debits.||Monzo's Targets sends notifications to warn if you're spending too fast. Dashboard changes from green to orange to red to indicate overpending.|
|Interest||0.5% AER up to £2,000, 0.25% over £2,000 to £85,000||Marketplace with 8 savings accounts both fixed rate and easy access, £500 minimum deposit.|
|Savings goals||Create different spending goals and protect money from daily spending||Monzo pots let you put money aside, protected from your daily spending|
|Visualisation||The Pulse circle graph shows you how much you have spent each day in real time and on what.||Monzo uses a monthly graph and a pie chart to show the trajectory of your money, and how it is broken down|
|Foreign ATM withdrawals||Free||£200 free monthly|
|Foreign transactions fee||No fees||No fees|
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Starling CEO Anne Boden explains why Starling Bank is different
Starling vs Monzo: opening an account
- For both, the application process takes less than 5 minutes and doesn’t require any paperwork.
- Download the app on your phone.
- Take a photo of some ID, and enter a name and address, and record a short verification video to prove your identity.
- With Starling, you can start paying for things straight away through Apple Pay and Google Pay. Or, wait 2 or 3 three business days before the card arrives. When it does, you can set up Samsung Pay, Garmin Pay and Fitbit pay too.
- Monzo: you’ll normally have to wait 2-7 days for the card to arrive. Lots of people get their card the next day. You can start tinkering with your account straight away. You can link Monzo to Apple Pay or Google Pay before your card arrives.
Starling Bank: award-winning banking on your mobile
- No monthly fees or fees overseas from Starling Bank
- Apply in minutes, direct from the app
- Best British Bank 2019 award winner
- Get instant notifications & insights on your spending habits
- Earn interest on your real-time balance
Which is the best for going abroad?
They’re very similar and great for travelling fee-free, but with one key difference: with Monzo, there’s a £200 limit on free cash withdrawals abroad – after which 3% is charged.
Starling’s ATM withdrawal limit is £300 a day, and this applies both at home or abroad. So, Starling might just be better for those looking for a bit of extra cash.
Other than this, they both offer the MasterCard exchange rate, and their options to temporarily freeze your card in your app could just be a life saver abroad.
How do they look on your phone?
Getting an overdraft
Starling and Monzo both offer overdrafts, but if you’re looking to take one out you should consider some key differences. First, you’ll have to pass “soft” credit checks to get an overdraft with either of the banks.
If accepted, you can take out an overdraft as large as £1000 with Monzo. They then charge a 50p flat rate if you go overdrawn by more than £20. So, no matter the size of your overdraft, it will cost you 50 pence.
It sounds simple. However, the downside is that unless you take out a fairly large overdraft, it’s not particularly great value for money.
Starling applies a percentage charge of 15% EAR (Equivalent Annual Rate) instead, meaning a customer who is £200 overdrawn for 14 days will pay £1.08 in overdraft fees. With Monzo you’d be paying £7 for that time.
In terms of their app features, there’s not a whole lot to separate them. What you can do on their apps is largely the same:
- Budgeting categories.Starling and Monzo automatically place your transactions into categories like groceries or eating out, which you set budgets for. The app reminds you if you’re close to overspending.
- Spending insights.Their apps will give you weekly or monthly reports about which shops or categories you’re spending most on. Spending too much of Pret sandwiches? The app will feed you the numbers.
- Saving. Monzo ‘Pots’ and Starling ‘Goals’ let you stash money away for particular goals. A holiday or Christmas present perhaps. Keeping the money out of sight but within reach could help you save.
Starling and Monzo interest rates
Starling is the only challenger bank that pays an interest on current account balances (0.5% up to £2,000, 0.25% up to £85,000). You can get a higher rate with Monzo, but only if you open a separate savings account with one of its partners through the marketplace.
Funds held in both banks are covered by the FSCS up to £85,000.
Other app integration and products
Integrating your bank account with other apps and services is another major boon of digital banking. Starling and Monzo offer similar levels of integration.
They both let you connect your card with Apple Pay and Google Pay, for instance. Both apps are now integrated with Yolt and Money Dashboard too, so you can access all of your bank and credit accounts in one place.
They’re both in the early phases of developing their marketplace. Monzo’s focuses mainly on savings account and also offers an energy switching service; Starling’s features a few investment and insurance products.
Finally, unlike Monzo, Starling also offers personal loans, euro accounts and fully-developed business accounts, all in-house.
Both Monzo and Starling are great options if you want to open an account with a challenger bank. They offer streamlined apps with loads of cool features, can be set up quickly, let you spend fee-free overseas and are constantly expanding their feature range.
All in all, Starling gets the upper hand, because of its higher foreign ATM limit and wider range of products and features. But it’s a really, really close call and you’ll probably have an excellent banking experience with either of them.Back to top