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The Varo Believe Secured Credit Card, issued by the online bank Varo, shares many similarities with other cards intended for consumers who want to build or rebuild their credit. Its closest relative may be the Chime Credit Builder Visa® Credit Card. Like that card — which is also aimed at beginners — the Varo credit card does not have an annual percentage rate, or APR; features no annual fee or minimum security deposit; and does not conduct a hard credit check when you apply. Those features can save you money and spare you from losing points from your credit score, which often happens after a hard inquiry.
The Varo Believe Secured Credit Card is designed to ward off overspending and missed or late payments, and it's even possible to earn rewards. However, the safeguards built into the card may feel restrictive and even overbearing to some.
Here are five things to know about the Varo credit card.
1. You need a Varo bank account to get the Varo credit card
There's no fee for setting up a Varo bank account, but it's still a hoop you'll need to jump through. And while there's also no security deposit required for the Varo credit card itself, you're only eligible to get one if your Varo account has received direct deposits of at least $500 in the past 90 days. Deposits from an employer or the government count; transfers from peer-to-peer apps like Venmo do not.
If your Varo bank account meets these requirements, you’ll be invited to apply for the Varo Believe Secured Credit Card in the Varo Bank app.
2. You set your own credit limit, to a point
To use the Varo Believe Secured Credit Card, you’ll have to transfer money from your Varo bank account to your Varo Believe secured account, which can only be done in the Varo app. The amount in the secured account becomes your credit limit.
But unlike a traditional credit card, the Varo credit card imposes spending caps. You'll be limited to $2,500 per day for purchases and $1,000 per day for cash advances, and the total of purchases and cash advances cannot exceed $10,000 per billing cycle.
One big purchase, such as new furniture, could put you over the spending limit and would require you to use another payment method if you needed to buy something else on the same day.
3. Making credit card payments is practically foolproof
The balance in your Varo Believe secured account is your credit limit, but it's also the funding source for credit card payments. To ensure that you'll always have enough money to pay your monthly bill in full, Varo automatically deducts the amount of any credit card transactions from the available balance in the secured account. That way, it’s impossible to overspend with the Varo credit card. Varo also locks your card if you miss a payment and won’t restore access until the entire balance is paid off.
To ensure timely payments, Varo offers a "SafePay" option. With SafePay enabled, balances are automatically paid in full at the end of the billing cycle.
The Varo credit card reports to all three major U.S. credit bureaus. So these measures undoubtedly can benefit cardholders who are building or repairing a credit history because they incentivize paying off the credit card balance, and payment history is a major factor in credit scores. However, such hand-holding is typically absent from traditional unsecured credit cards. If and when you upgrade from the Varo Believe Secured Credit Card to a traditional card, know that you’ll likely need to be more conscientious about paying off your monthly statements. (The secured product is the only credit card that Varo offers, so there's no upgrade path within its portfolio.)
4. The APR is 0%
Even if you miss a credit card payment, your balance will not grow due to interest because the APR on the Varo Believe Secured Credit Card is 0%. That’s an incredibly rare, potentially money-saving perk and one of the highlights of this card.
But again, it's not how traditional credit cards work. So when you're ready for an upgrade from the Varo credit card, make sure you know your new card's APR.
5. You can earn cash back on select purchases
The Varo Believe Secured Credit Card earns cash back in two different ways: online offers and card-linked offers. Varo’s online offers — akin to a credit card bonus mall with a traditional credit card — award cash back from purchases at retailers that you’ve accessed through the Varo app or through a promotional email from Varo.
Or you could use a card-linked offer to get cash back, which functions like a coupon. Card-linked offers must be activated first, and the purchase must be made with your Varo credit card to qualify for the discount.
Cash back is automatically deposited into your Varo bank account once you’ve earned more than $5. Cash-back earnings with the Varo Believe Credit Card are capped at $50 per month, whereas other secured credit cards offer unlimited cash back and generally don't require that you shop through a specific portal or activate individual offers.
Card art courtesy of Varo.
The Chime Credit Builder Visa® Credit Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.