Varo Bank is a popular digital bank that seems to be collecting bad reviews from customers lately.
It also has relatively simple accounts, and if they can’t get that right, I’m afraid for their future.
Don’t worry, there are many tried and tested alternatives I can recommend to you. But first, here are Varo’s pros and cons.
| Varo Pros | Varo Cons |
|---|---|
| No maintenance fees | Limits on cash deposits |
| No overdraft or ATM fees | Horrible customer service |
| Early payday feature | Not many features |
| High yield savings account | |
| No transfer or debit card replacement fees | |
| No minimum balance |
Now, here are the digital banks I can recommend to you as I’ve tried, used, and tested them for the past couple of years.
- MoneyLion
- SoFi
- Current
- Chime
- Aspiration
- Cash App
| Varo | MoneyLion | Sofi | Current | Chime | Aspiration | Cash App | |
| Customers (mln) | 7 | 5.4 | 4 | 5 | 14 | 6 | 70 |
| Banking Licence | Yes | No | Yes | No | Yes | No | No |
| Business Accounts | No | No | No | No | No | No | Yes |
| Joint Accounts | No | No | Yes | No | No | Yes | No |
| Overdraft | Yes | Yes | Yes | Yes | Yes | No | Yes |
| Investing | No | Yes | Yes | No | No | Yes | Yes |
| Early Deposit | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| FDIC Insurance | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Trustpilot Rating | 3.5/5 | 4.7/5 | 4.5/5 | 3.7/5 | 2.9/5 | 4.4/5 | 1.2/5 |
- Automated investing for beginners
- Pick stocks collections you love
- Invest in the world you want to see
1. MoneyLion
| Pros | Cons |
|---|---|
| Low monthly fee ($1) | No savings account |
| Cash advance up to $500 | No interest on balance |
| Early payday feature | High credit builder fee |
| Investment platform | |
| Credit builder | |
| Cashback rewards |
MoneyLion is based in New York and offers banking, personal finance, and investment services for a low monthly subscription fee, leading many to refer to it as the ‘Netflix of finance.’
MoneyLion has knocked it out of the park with its superb all-in-one financial service that has you spending, saving, budgeting, investing, and even building up credit.
Like Varo, MoneyLion offers a checking account, credit builder, early payday, and cash advance.
However, this digital banking app goes much further by offering an investment platform, cashback rewards, roundups, price protection, a dedicated financial education platform, and more.
Unlike Varo, which is a fully-fledged national chartered bank, MoneyLion is not a bank but a fintech company. Nevertheless, funds up to $250,000 are FDIC-insured in all but investment accounts.
I love MoneyLion because it has more features and is a better app than Varo. I also love the almost limitless cashback rewards at retailers and apps like Walgreens, DoorDash, Groupon, and many others.
It’s a lottery, as you never know how much you will get back, but it’s also thrilling for that reason.
2. SoFi
| Pros | Cons |
|---|---|
| No maintenance fees | Expensive cash deposits |
| Overdraft protection | |
| Credit score and budgeting assistance | |
| High savings interest rate | |
| Personal, auto, mortgage loans | |
| Financial and estate planning | |
| Career counseling |
SoFi is closest to a traditional bank in terms of how many financial and banking products it offers. In all other aspects, it’s much better than those dinosaurs.
Although SoFi is also a fully-fledged bank with FDIC insurance, it’s also much different than Varo, which decided to offer only the most basic products.
With SoFi, you won’t need to get any other accounts as you can take out personal, auto, and mortgage loans, get a bank account without fees and a high savings interest rate, get a credit card and insurance, as well as track your credit score.
What I love the most about this bank is that they offer the services of professional financial planners for free.
Simply download the app and set up a call. The planner will analyze your situation and offer you personalized advice as well as the next steps you should take.
Really, the only thing I don’t like about SoFi is that I have to use Green Dot to deposit cash. This can be expensive if done often.
READ ALSO: 3 Easy Ways to Withdraw Money from MoneyLion Without a Card
3. Current
| Pros | Cons |
|---|---|
| No monthly fees | $5 debit card replacement |
| Overdraft Protection up to $200 | No joint accounts |
| Early payday | |
| High savings interest rate | |
| Gas hold refunds | |
| Teen accounts |
I love Current!
The only reason why I didn’t put it in the first place is the fact that it has fewer financial products and services than ML and SoFi. This, however, might be a plus for some people that wouldn’t be using these features in the first place.
The thing I like the most about Current is the high 4.00% APY on your Savings Pods. It’s also much easier attainable than Varo’s APY, as you only need to have direct deposits of $200 each month.
Unlike Varo, you can also invest your money into cryptos like Bitcoin, Ethereum, and Dogecoin. I am personally done with investing in crypto, but for many others, it’s still an opportunity they like having.
There are almost no drawbacks to having a Current account, as you can even open a teen account for your kids. However, you won’t be able to open a joint account with your spouse yet.
4. Chime
| Pros | Cons |
|---|---|
| No maintenance fees | Limited cash deposit locations |
| Overdraft Protection up to $200 | No joint accounts |
| Peer-to-peer transfers to anybody | |
| High interest rate on savings accounts | |
| Credit Builder Card |
Chime is a digital bank that is the most similar to Varo. It doesn’t charge its customers any monthly fees or any hidden fees, for that matter. It also sets up direct deposit so that you can receive your paycheck two days earlier.
With Chime, you will not be charged overdraft fees on debit card purchases of up to $200 with the feature SpotMe.
If you have a poor or no credit history, Chime is an excellent choice. They provide customers with a Chime Credit Builder Visa Credit Card to assist them in improving their credit scores.
This feature doesn’t come with any interest or annual fees, and you don’t need a credit check to apply.
Both Chime and Varo have automated savings for their customers at no fee. With Chime, you can use direct deposit to transfer a specific percentage to your savings account when you get paid.
Accessing your money is pretty easy, with more than 60,000 fee-free ATMs and more than the top 3 national banks.
Security is a priority with Chime. All the deposits are insured up to $250,000 through Bancorp Bank or Stride Bank. Your information, money, and data are also protected using encryption.
Mobile banking with Chime is pretty easy. The award-winning banking app allows you to track spending, grow your savings, transfer money, and make payments.
It also functions well on iPhone and Android devices. In addition, the app sends notifications with your daily bank account balance and instant transaction alerts when you use your debit card.
READ ALSO: 7 Reasons Why Chime is Better Than a Bank (2 Why It’s Not)
5. Aspiration
| Pros | Cons |
|---|---|
| Pay what is fair ($0 an option) | Must spend $1,000 minimum monthly on a debit card to earn the APY |
| Offsets your carbon footprint | Transfer limits in the first 30 days |
| No money invested in fossil fuel projects | $10 minimum opening deposit |
| Plant a tree with every card swipe |
Aspiration is marketing itself as a sustainable bank that cares about the environment. It has over six million customers that appreciate the fact that the company isn’t investing their funds into fossil fuel projects and that they will plant trees as you spend money with their card.
This is exactly what prompted me to open an Aspiration account and even opt for the Plus account ($7.99/m) that automatically offsets carbon from my driving and gas purchases. Varo, as far as I know, doesn’t have any similar initiatives.
Apart from sustainability, Aspiration offers a solid, FDIC-insured (up to $2.25M per depositor!) account that comes with up to 10% cash back (with Aspiration Plus), in-network fee-free withdrawals, and a high-interest rate.
6. Cash App
| Pros | Cons |
|---|---|
| No maintenance fees | Spending limits |
| No minimum balance | Bitcoin fees |
| Free tax returns | Withdrawal limits |
| Stock and Bitcoin trading | Favorite tool for scammers |
| Teens can open account |
Cash App was founded in 2013 by Jack Dorsey and Jim McKelvey and is part of their successful Block, Inc company.
Cash App is already installed on around 70 to 80 million devices, and more and more people are joining each day, even though it’s only available here and in the UK, where it’s had limited success.
As an alternative to Varo, it provides a simple banking account that lets you get direct deposits without fees and even two days earlier. It’s an excellent platform to send and receive money at no cost.
Again, although it isn’t a bank, your funds are FDIC-insured as they have partnered with traditional banks to bring banking products to a new generation of customers.
Cash App relatively recently acquired Credit Karma, and now offers completely free tax returns you can file from your computer or phone, with no sneaky add-ons and paywalls (I’m looking at you, TurboTax). That’s definitely a plus.
What I don’t like about Cash App is the lack of customer support agents. When an app is nearing 100 million users, there should be an army of support agents. Unfortunately, that’s not the case, as I, and others, are often left stranded.
Along with Zelle, and Venmo, Cash App is repeatedly used by thousands of scammers.
READ NEXT: Cash App Vs. Bank Account (Is It a Replacement?)
Is Varo in Trouble (Is it Running Out of Money)?
Varo is notable for being the first challenger bank to get a national bank charter.
However, it seems that the bank isn’t that good with money as they are reporting over $200 million net loss each year.
Because investors aren’t throwing money at digital banks anymore due to the recession and all-around unfavorable financial situation, Varo had to fire a significant percentage of its workforce and pull back on marketing expenditures.
The bank is now raising funds ($50 million) at a 28% discount. Namely, while the bank’s valuation was $2.5 billion in 2021, the capital raise is happening at “only” a $1.5 billion valuation.
Why is Varo Closing Accounts?
Varo and other digital banks are somewhat known for abruptly closing their customers’ accounts. Although for some customers, this is a mystery and often a nightmare, there is a simple explanation.
You see, you simply can’t use your Varo account and cards for business purposes, online gambling, selling counterfeit or stolen goods, or any illegal activity. Buying crypto is often flagged as well.
In short, if Varo notices any unusual activity (they use that term loosely), you can end up with a frozen, suspended, or even closed account – without any explanation as they either aren’t allowed to disclose the reasons or they won’t.
