Online banks are becoming increasingly popular every year as users continue to appreciate the many advantages they offer over physical banks. In fact, Business Insider estimates that about 30% of Americans have an online-only bank account. As such, competition is fierce among the dozens of online banks available today. One such battle is Varo Bank vs. Ally Bank, and here we’re going to highlight what makes each one unique to help you decide on the better one.
Among online banks, Varo Bank has the added advantage of having received a national bank charter. It was the first to receive a banking charter and elevated its standing among the competition. Therefore, you would not be surprised to know that over 3 million individuals have opened an account with Varo and the growth has been exponential in recent years.
As far as online banks go, Varo Bank can be considered relatively new after being launched in 2016. Nevertheless, the bank’s founders have focused on providing a seamless customer experience from quicker deposits and withdrawals, free transactions, and an easy to use platform.
Although not the first online-only bank, Ally Bank was among the pioneers of the industries. Ally first launched in 2009 at a time when only a handful of online banks existed and has stood the test of time. In fact, Ally Bank has thrived in the 12 years it has been around, consistently receiving awards year after year including from GOBankingRates.
Even without a physical branch, Ally bank is trusted by over 6.5 million customers, has $139 billion in customer deposits and employs 9,500 people. Part of Ally’s appeal comes from its diversification beyond personal banking to online trading and car financing and leasing. It is for this reason that many Americans will, at some point, consider joining the Ally family.
Varo Bank vs. Ally Bank comparison
|Varo Bank||Ally Bank|
|APY||3.00% (Up to $5,000 deposits)|
0.20% (Over $5,000 deposits)
In network: Free
Out of network: $2.50
Between $0 and $5
Cash deposits: $5.95
In network: Free
Out of network: $2.50
Up to $10 reimbursed at the end of each statement cycle
Overdraft fees: None
Cash deposits: $5.95
|Security||Chartered national bank; FDIC insured||FDIC insured|
You will be charged little in fees when using Varo Bank as there are no fees for making regular transactions by debit card or bank transfer even when doing so in a foreign currency. Cash withdrawals are also free as long as you use any one of the 55,000 ATMs within the Allpoint Network. Such ATMs are spread across several countries including the US, Canada, the UK, Australia, Canada, Mexico and more. However, a $2.50 fee will be charged for withdrawals outside this network.
Some other charges to expect include a fee for using Varo Advance, Vado Bank’s overdraft facility. The fee will range between $0 and $5 depending on the amount advanced. Other than that, cash deposits at Green Dot outlets such as CVS and Walgreens have a fee of $5.95.
Being an online only bank similar to Varo Bank, a lot of the fees are the same especially regarding cash withdrawals and deposits. One major difference, though, is that Ally Bank will reimburse you for ATM withdrawal fees up to $10 at the end of each statement cycle. In addition, Ally eliminated overdraft fees from June 2021 regardless of the amount.
Ease of use
Convenience is paramount at Varo Bank, so the company has made it easy to get started. Simply download the Varo Bank app on your mobile device, whether Android or iOS, and follow the prompts to create an account. Alternatively, you can create the account from the Varo Bank website and log into the app using the details you provided.
Varo does not have a minimum required deposit to create an account so you can get started with as little as a penny.. As discussed in the previous section, no fees are charged for money transfer, and you can do so by ACH transfer, bank transfer, direct deposit or mobile deposit of paper checks. A debit card will also be issued for free to make shopping and other transactions easier while helping you to keep track of your expenses.
With no set minimum deposit requirements, joining Ally Bank is also as easy as Varo Bank. But Ally allows even more ways to make your deposits including eCheck Deposit, Zelle, PayPal and other mobile wallets. Making transactions is also easier since you can even use your voice through Amazon Alexa, so it’s more convenient.
On the Apple App Store, Ally Bank App has a high rating of 4.8/5.0 following thousands of downloads, indicating that a lot of people enjoy using the app. We tried to use it too during this review, and we found it easy to use and very effective.
Among both online and physical banks, Varo has one of the highest interest rates for savers. With a maximum APY (Annual Percentage Yield) of 3.00%, you can earn up to $30 in interest on a $1,000 savings balance. To earn this interest, certain conditions must be met such as $1,000 in direct deposits each month, otherwise you would earn the standard 0.20% APY.
Add to that, the app automatically saves any extra cents from your transactions so that you continue earning interest without having to allocate funds manually.
At Ally, the maximum APY may not be as high as that at Varo but it’s consistent at 0.50% without any conditions. Any interest earned can be withdrawn freely at any time without penalties. You can push this even further up to 0.80% using a CD account, but to earn this amount you would have to commit to a 5-year CD.
Verdict: Which one is better for you?
We found Varo Bank to be more suitable for anyone with a priority on security and savings. Remember that this was the first online bank to receive a national bank charter, so it’s clearly a trusted company.
Meanwhile, an Ally Bank is what you need if you’re an individual who conducts multiple transactions frequently using different systems and services. Ally has made it easier to use the app and accepts different funding methods for this reason, even while maintaining a high interest rate.
Is it safe to do online banking?
Online banks are insured by FDIC for up to $250,000 so your money remains safe.
What is the minimum deposit required?
Neither Ally nor Varo have a minimum deposit requirement, so you can start with as little as a penny,
What are the fees charged?
You’re only charged for ATM withdrawal through out-of-network ATM machines.