Challenger bank Monzo has announced it is launching a cashback feature for its customers.
Customers will be able to earn back between 2 per cent and 10 per cent with each offer, or possibly more depending on the retailer.
Monzo has launched the feature with merchants including Asda, Boots, H&M, Ebay, Deliveroo and Disney+.
To start using Monzo cashback, customers will need to activate the feature in Monzo’s app and use their Monzo card to shop in store or online at selected retailers.
Money back bonus: Monzo has launched a new cashback feature for customers which will allow them to earn back a percentage of their spend with selected retailers
The bank said it has launched the feature as new research from Monzo shows that around a quarter of customers said even a small amount of cashback would make a meaningful difference to them.
Andrew Hagger, founder of personal finance website Money Comms said: ‘I think Monzo has launched a cashback programme to widen the appeal of its current account and to encourage customers to use their Monzo cards more frequently.’
The Monzo deal is made up of different cashback deals with different retailers rather than a set percentage across all spend.
In this sense it is similar to fellow challenger Revolut’s offer, where customers get varying amounts of cashback depending on the retailer where the money is spent.
With Monzo, customers will get instant cashback notifications after purchases so they will be able to see their upcoming cashback piling up in real time.
James Blower, founder of website Savings Guru says: ‘This kind of cashback offer isn’t new – Revolut and American Express, to use two examples, both offer similar rewards to their customers – but this is a tweak on it for a bank to offer it.’
The latest Current Account Switch Service figures showed that Monzo lost 9,080 more customers than it gained between April and June 2023. Its rival Starling lost 2,931 more customers than it gained.
But Blower does not think Monzo has launched the offer now to fight back against competitors such as Starling or JP Morgan’s Chase, as all three of them have seen net losses of customers in the most recent Current Account Switching Service statistics.
He says: ‘It’s more likely that this is part of Monzo’s roadmap to continue to develop and offer better value for its customers, to compete against the high street banks who are spending hundreds of pounds to each new current account switcher to incentivise them to move.’
What incentives do other banks offer?
This year, mainstream banks such as Natwest, Halifax and Santander have all offered cash bonuses to customers who switched their main current account, sometimes amounting to £200 or more.
Starling does not currently offer a cashback incentive, but it does offer an impressive 3.25 per cent interest on current account balances up to £5,000 or £10,000 for joint accounts.
If you were to keep at least £5,000 in a Starling account, you would earn the equivalent of £13.54 per month – no matter how many or how few debit card transactions you made.
Personal account holders could receive £162.50 in a year or £325 if they had a joint account, if they maintained a balance of £5,000.
Chase offers 1 per cent cash back on the first £1,500 of monthly debit card spending for 12 months.
It is capped at £15 per month, and customers can get 1 per cent on almost all their spending apart from a few exceptions like gambling and estate agent fees.
This is a straightforward approach with the same level of reward wherever you spend.
Chase also offers 1 per cent interest on current account balances. The interest is calculated daily and paid at the start of the next month.
Newer digital bank Kroo pays 4.35 per cent on current account balances up to £85,000.
But from this month, the bank will apply a base rate tracker to its rate, which tracks 0.9 per cent below the base rate – so this rate could start to slip early next year if interest rates reverse.
Anyone thinking of signing up to Monzo for the cashback deal alone may want to wait until they know more about which retailers are included, and how much cashback they will offer.
Hagger said: ‘It’s tough out there for retailers at the moment, so don’t expect to get double-digit cashback unless it’s for a one-off deal that may have limited appeal.
‘It seems that the Monzo rewards are still being rolled out and actual examples of percentage returns are still a bit hard to pin down.
‘Still, it’s a positive move and we all love to get something back for nothing – in this case a reward for our custom – so I’m sure Monzo customers will be happy to see this new current account feature.’
