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Varo Bank Debuts Line of Credit as Consumers Remain Pinched

consumer finances

Varo Bank has introduced two new products aimed at helping Americans alleviate their financial pressures.

The online bank on Tuesday (March 26) announced the launch of Varo Line of Credit, along with the company’s new Smart Bank Account tools, coming at a time when consumers are finding it harder to cover emergency expenses.

“Far too many Americans face increasing daily challenges trying to make ends meet,” Varo said in a news release. “Inflation, higher credit card debt, student loan repayments and unexpected expenses take a toll on consumers’ well-being.”

The line of credit offering lets consumers get up $2,000 for unanticipated expenses like car repairs and medical bills and make repayments over time.

Meanwhile, the Smart Bank Account features let improve the way customers track and manage their money day-to-day within the Varo Bank app, with the account screen now automatically showing “a real-time visual trend of their spending during the current and previous month,” to let users compare their financial position month to month and plan for upcoming expenses. 

As PYMNTS wrote earlier this month, consumers are now socking away less money for emergency expenditures than they were last winter. 

While the personal savings rate in January — 3.8% — was still higher than December’s 3.7%, that figure was still below the 4.8% consumers were saving last summer.

“The trend may not ring immediate alarm bells, but it could prove problematic down the road should consumers run into unexpected expenses, and the likelihood that the average American will face a financial emergency is significant,” that report said.

The PYMNTS Intelligence report “The Credit Accessibility Series: Unexpected Expenses and the Demand for External Financing” found that 56% of consumers had recently been faced with pricey and unexpected expenses that set them back $5,500, on average.

Things were even worse for key demographic segments featured in the study. For example, 70% of Generation Z consumers found themselves facing financial emergencies that ate up most — if not all — of their average $3,400 nest egg. 

“Those who had been rejected for at least one credit application and labeled ‘credit-marginalized’ faced even steeper financial challenges, with 80% saying they had recently been hit with unforeseen expenses that exceeded the average $4,400 they had on hand,” PYMNTS wrote.