Varo Bank, a fully digital banking option, aims to support consumers with its high-yield savings account, the Varo Believe secured credit card and the provision of emergency money through Varo Advance.
Varo offers consumers a high-yield savings account with a competitive annual return (APY) of 1.20%. However, that could be increased to 5% for consumers who meet certain criteria. According to the FDICthe national average APY for a savings account is just 0.08%.
To qualify for the 5% APY, consumers must have $1,000 or more in direct deposits from paychecks, pensions, or government benefits such as Social Security and unemployment. Consumers require an account balance greater than or equal to $0 and no more than $5,000 in their Varo Savings Account at the end of the business day for a calendar month at the end of the qualifying period.
Consumers must meet all three criteria during the waiting period, which runs from the first to the last calendar day of the month. Before consumers qualify for the 5% rate, consumers earn 1.20%, which is still equal to or better than most high-yield offers.
For context, Marcus of Goldman Sachs recently released the APY . raised from his savings account to 1.20%. American Express offers a fully digital savings account with an APY of 1% and Chime offers an APY of 0.5%. In addition, SoFi raised the interest rate for its hybrid checking and savings account to 1.50% for direct deposit members (0.90% for consumers who have no direct deposits).
Earning a 5% APY, even if it has a $5,000 balance cap, would be of great help to consumers struggling with the rising cost of goods as inflation is still at 8.6%. Having money in a bank account and accruing interest is a good form of passive income.
Varo, unlike other digital banks, including Chime, has a federal banking charter. That means it does not rely on an outside banking partner and is instead directly regulated and controlled by national regulators. This allows Varo to offer such high interest rates compared to other FinTechs. It also gives Varo more autonomy in the credit products it can offer consumers.
According to Varo founder and CEO Colin Walsh, becoming a full-fledged bank will enable Varo to offer its customers more in this difficult economic environment, including higher interest rates on savings accounts and loans with more affordable rates. In addition to the attractive range of savings accounts, Varo offers no overdraft fees, no minimum account balances, no monthly bank fees, no transfer fees and no hidden fees.
“What inspired me to create Varo was the recognition that in many ways the banking system works just fine for people who have money, wealth and income,” Walsh said. ZDNet† “But if you’re struggling to make ends meet, and you’re trying to make the next paycheck, or you’re trying to build your credit or access credit or even start basic savings, the system is really broken.” .”
Walsh, who came from a background working with major financial services companies including Wells Fargo and American Express, sought to build a bank that did more to support the financial health of its customers rather than harm them through the use of fees. .
A JD Power study recently found that: the percentage of financially vulnerable consumers – consumers who struggle to pay immediately and plan for the future – is increasing†
The data analytics company also found that overall customer satisfaction with their financial services companies is declining due to lack of advice and guidance and from incurring robbery costs such as an overdraft or insufficient fund costs.
“The customers who can afford it the least are the ones who have to pay $15 a month to have a bank account, or they get a $30 or $40 fee if they go over a bit, to me that’s just outrageous Walsh said.
In addition to low-cost and high-yield savings accounts, Varo offers customers the option of building credit with Varo Believe, the bank’s secured credit card.
Most secured cards offer cardholders a way to build credit through positive payments after a one-time, refundable deposit that forms the initial credit limit. However, Varo’s card is directly linked to a consumer’s bank account with no deposit required. The card’s unique feature is no APR, which means that consumers will not incur any interest charges.
Just pay the bill on time every month and your credit will improve. Varo offers a SafePay alert feature that lets consumers know when a payment is due so they don’t miss it.
Cardholders can even shop from a selection of merchants to earn rewards, something not all secured cards offer. Rewards are automatically redeemed in your account as cashback when you reach $5. The same rewards program also works with the standard Varo debit card offering.
Varo also offers Varo Advance, which allows consumers to borrow up to $100 for a $5 fee. There are no service fees, interest charges, late fees or penalties, and no credit check is required, meaning your credit is not compromised. Varo lets consumers borrow $20 for free as long as they have an approved account. In addition, Varo offers two days early direct deposit for even more access to money when consumers need it.
“With inflation rising as fast as it is, with interest rates rising, rent costs, cost of ownership, everything is getting more expensive for people. What we hear from our customers and why they come to us is a couple of things,” Walsh said.
†[Consumers] want to reduce their spending, but they also want to try to grow the money they have and manage it better. So what we’ve been working really hard on is to eliminate all those account fees. Give people those early paychecks, give them access to loans, cheap interest credit where they have to get ahead on their own — whether it’s filling up that tank or bridging to the next paycheck — as well as just other, faster payment options.
According to JD Power, customer satisfaction at banks across the industry has declined. Consumers who exclusively bank with a fully digital bank experience less satisfaction if there are no physical locations to use in addition to the digital offering. However, Walsh said Varo has no such problem and was surprised by the high demand and enthusiasm of consumers to embrace digital banking.
“There is a huge population of consumers who have absolutely no problems with digital solutions,” he said. “Gen Z are coming of age and their whole life has been digital. And for the most part millennials too. And so we haven’t had any problems with not having physical, physical and physical [locations]†
Varo offers chat boxes, voice chat, email, and in-app communications for customers to contact, as well as a blog and FAQ section to assist with troubleshooting. Walsh said Varo is well positioned to support the financial health of its clients during this difficult economic cycle.
“I think the challenges just remain to create great experiences, continue to support customers when they need to get a handle on [the bank] as well as through the products they need, while being accessible,” said Walsh. “For me, that’s where we’re very focused. Making sure we design these great experiences, create products that add real value to our customers’ lives, and just be able to stay on track and do that while in a noisy environment.”