Challenger bank Monzo said on Tuesday that it will introduce new fees for replacement debit cards and cash withdrawals of more than £250 ($336) in a 30-day period.
The fees, which will come into effect from 31 October, will see some customers pay a 3% levy on withdrawals in the UK and Europe. The bank will also charge £5 for replacement debit cards.
In a statement announcing the move, Monzo said that, based on how people used their bank accounts in the last year, 79% of customers will not be affected by the changes.
Monzo said the new fees are unlikely to affect customers if they are relying on the challenger bank for their core banking needs, or if they pay for Monzo Plus, its recently launched premium subscription plan.
The average Monzo customer only withdraws £36 a month, according to internal data. Some 90% of people have never ordered a replacement card, and 99% have never ordered more than two, Monzo said.
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While most customers have never ordered a replacement card, 1% of Monzo customers make up 35% of the challenger bank’s total card replacement costs.
Customers that pay in at least £500 to their Monzo account every 35 days and have at least one active direct debit on the account will be exempt from the charges, as will those who frequently receive certain benefits payments.
Having your student loan paid into a Monzo account every eight months or sharing a Monzo joint account with someone who uses the bank for their core banking needs will also exempt a customer from the charges.
“It’s really important that you don’t have any restrictions on your access to cash if you’re using Monzo more as a bank than as a spending account, because you’re likely to be relying on us for more of your core banking needs,” Monzo said on Tuesday.
The introduction of the fees comes at a critical time for Monzo, which has been forced to lay off and furlough staff in recent months in response to the coronavirus pandemic.
In July, it relaunched Monzo Plus, which offers an enhanced savings rate and extra features for customers who pay £5 a month.
The loss-making business said last September that a paid subscription offering represented one of its biggest opportunities to become a “sustainable business.”
Monzo was founded in 2015 as one of the UK’s first app-only banks and has raised over £350m ($470.6m) in funding to date.
The startup was valued at over £2bn in 2019 but saw its value drop to £1.25bn this year due to the impact of the pandemic.