Which Bank is Better: Chime or Varo?

When it comes to choosing a bank, the decision can be quite confusing. Two popular options that have gained attention over the past years are Chime Bank and Varo Bank. Both offer innovative features and unique bank services, and both have had their share of positive feedback. However, which one is better for you? In this article, we will dive into the differences and key features of both banks to help you decide.

Overview

Chime is a digital-only bank that originated in 2014 and caters to younger consumers and those new to banking. Varo, on the other hand, is a direct-to-consumer bank that debuted in 2015 and is known for its customer-centric approach. Both banks provide a range of banking services without physical branches, focusing on using technology to improve the user experience and offering competitive interest rates.

No Overdraft Fees

One of the key distinctions between Chime and Varo is their approach to overdraft fees. Both banks avoid charging overdraft fees (wildly common in traditional banks) but there are some notable differences in how they handle these fees.

Chime

In the case of Chime, overdraft protection is optional and in effect, you are liable for overdraft fees if the bank declines your transaction. If you opt for overdraft protection, it comes with a $1 fee for the first two days, and $21 after the fifth day, for each transaction declined. However, this fee is waived if you meet a monthly minimum of $500 in direct deposit activities.

Varo

Varo, on the other hand, takes a more straightforward approach to overdraft fees. As a no-fee bank, you can entirely avoid any overdraft penalties by maintaining a sufficient balance in your account. Thus, if you get at least $1000 in your account through direct deposit each month, Varo ensures that you cover every transaction without any additional charges.

Other Features and Services

Both Chime and Varo offer a range of features and services to enhance their customers' banking experience, but some areas stand out more than others.

Chime

Checking Accounts: Chime offers two types of checking accounts; it’s free Classic Checking with no monthly fee and Cash Checking, a high-yield account with a 1% APY for balances under $15,000, and 0.40% APY above that, both capped at 0.75%. Credit Card: Chime offers a rewards credit card with 1.5% cash back on all purchases. It also has an annual fee, and there are no rewards for spending under $500 in the first year. Treasury Account: This is actually a credit account that can provide short-term financial needs. It doesn't earn interest but has an early-payment fee of $20 for the next two days if funds are withdrawn before the due date. There are no fees if the minimum $500 in direct deposit is met each month.

Varo

Checking Accounts: Varo has a single type of account that is free and comes with no monthly fees. It features a 0.3% annual yield on any amount in the account. Credit Card: Varo also has a rewards credit card with a 2% cash back on all purchases. Like Chime, it has an annual fee until you have spent at least $500 in the first year. Investment Platform: Varo’s Investment Platform, Varo Invest, allows customers to invest in a diversified portfolio through an app. This feature is unique compared to other fintech banks and can be quite appealing to those looking to diversify their investments without leaving the bank.

Conclusion

Ultimately, the choice between Chime and Varo comes down to your specific banking needs and financial habits. Chime is a good fit if you are concerned about overdraft protection and are willing to meet the monthly minimum transaction requirements to avoid any fees. Varo is a better option if you are looking for a no-fee bank and prefer a more straightforward approach to managing your finances, especially if you maintain a sufficient balance in your account through direct deposits.

Keywords

#Chime Bank offers a range of banking services including checking accounts, credit cards, and treasury accounts. It charges $1 for the first two days of overdraft protection and $21 after the fifth day for declined transactions. However, the fee is waived if you meet a monthly minimum of $500 in direct deposit.

#Varo Bank provides a no-fee and no-overdraft bank with a 0.3% annual yield on any amount. It is known for its direct-to-consumer approach and no monthly fees. Varo also offers a unique investment platform, Varo Invest, allowing customers to invest in a diversified portfolio.

#bank comparison focuses on the features and services of Chime and Varo, highlighting their differences in handling overdraft fees and active features such as checking accounts, credit cards, and investment platforms.