Comparing the Direct Express Prepaid Card to Varo and Axos

Adam Rust

Direct Express, the prepaid debit card utilized by the Treasury Department of the United States to enable direct deposit payments of federal benefits to individuals who are otherwise unbanked, is used by millions of Americans. Is it the right card? Are there other options that might bring more value to consumers?

Since so many people use Direct Express, it’s worth asking if the program works. The Better Business Bureau lists 607 complaints about the card. It has a one-star rating. The BBB notes “based on BBB filers, U.S. Direct Express has a pattern of disputes alleging billing and service issues. Consumers allege that fraudulent charges on their accounts go unacknowledged and unresolved. Consumers also allege that when they reach out to U.S. Direct Express, to express concerns, that customer service is unresponsive and does not resolve their issues. Furthermore, Consumers allege fraudulent charges are not refunded, even after disputes are filed and approved.”  

Let's start with the ratings on the AppStore:

Varo Money – 4.7 out of 5 stars

Direct Express – 2.9 stars

•       Axos Essentials - 3.0 stars, but less than 100 reviews. Generally, until an app has thousands of ratings, I discount the score. It only takes a handful of reviews from frustrated customers to dramatically underweight a result.

Alternatives to the Direct Express Card
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A comparison of fees and conditions of Direct Express to Varo Money and Axos Essentials

Let's compare the Direct Express Card to two options: the Varo Money  and the Axos Essentials bank accounts

Accessing Funds

1st ATM withdrawal per month: Varo Money and Direct Express offer the first withdrawal for free. In face, all ATM withdrawals made from inside the Allpoint surcharge-free ATM network.

Axos Essentials Checking rebates all ATM visits inside the domestic United States. Additionally, they do not place a limit on the number of visits per month.

ATM withdrawals thereafter: Direct Express charges 90 cents for the second and each subsequent ATM withdrawal. The owner of the ATM is likely to charge several more dollars. By contrast, Varo offers unlimited free ATMs inside its partner surcharge-free network, and Axos offers rebates at every ATM.  

With all cards, consumers can get cash-back at the point-of-sale for free.

Spending Funds

It is free to swipe with any of these cards.

Online billpay: Direct Express charges 50 cents for each billpay request. Varo and Axos offer billpay for free.  

Direct Express account holders will pay 3 percent of the amount of the purchase for foreign transactions. Varo does not charge a fee to spend money overseas. Axos applies a charge of 1 percent of the face value of the transcation.

Other features:

Varo Money can provide a pre-cleared pre-debited check to a consumer.

Varo Money is adding new integrations with popular payments apps like Venmo, PayPal, Apple Pay, Google Pay, Samsung Pay, and Square Cash. Direct Express does not yet offer integrations with these services.

You can move money between like accounts (Varo to Varo), but you cannot with Direct Express.

Varo offers an overdraft service without a fee. Account holders must meet criteria to qualify: set up a direct deposit of at least a minimum amount, and surpass a required number of debit card purchases.

Card replacement: With Direct Express, the first replacement is free. Replacement cards are always free at Varo Money. Likewise, they are free with Axos Essentials, too.

Customer service calls with a living person: Free with Direct Express. Varo does not offer personal assistance. Instead they use chat and email from inside their app.

Direct express charges 75 cents to consumers who request a paper statement. Paper statements are free upon request for Varo account holders. Axos charges five dollars for paper statement - but it is free for electronic copies.

Adding Funds

Direct Express does not offer remote photo deposit of checks. Varo Money and Axos provide photo check deposit for free.

You can deposit cash to the Varo account or the Axos Essentials account by purchasing a load at Walgreen’s, Wal-Mart, and other national chains. The issue is not discussed on the Direct Express website. I would expect that you cannot. In general, Direct Express is designed to only receive funds via direct deposit from the Department of the Treasury.

The biggest differences:

- Access to ATMs:  Direct Express provides one free ATM visit per month. After that, Direct Express charges 90 cents and the host bank of the ATM will most likely add on an additional charge of several dollars.

- Bill pay costs 50 cents: Bill pay is normally free. Varo Money and A offer online billpay for free. In fact, by charging for online bill pay, the Direct Express is an outlier in the market.

- Paper statements cost money: The research says that older people still like paper statements. Why does an account marketed primarily to older people charge for a paper statement?

- The Direct Express account only accepts deposits from one source: There is no way to add cash to the card. Consumers cannot use the app to take a photo of the check and then upload the funds for deposit remotely.

Use Cases

Use Case: Pay rent. To pay rent with a Direct Express Card, an account holder must either pay in cash or allow the landlord to pull money by MasterCard. While some may accept cash, it still seems less than ideal. Drawing that cash out would use the account holder’s only ATM withdrawal per month, and conversely, landlords would be unlikely to accept MasterCard, as the network will apply a three percent fee.  They could also pay with online bill pay, but the payment would have to be made three to seven days in advance to give the Postal Service time to deliver the check.

By contrast, with a WiseWage card, a person could use those same modes (albeit it with unlimited ATMs) and also others. Paying by Venmo or other digital payments is free. The Varo Card has a pre-cleared overdraft-free check function.

Use Case: Buy gas after hours. A Direct Express account holder cannot buy gas at the pump. He or she must prepay inside.

Use Case: Send money to grandchildren: A Direct Express account holder would have to use cash – possibly through the mail if the grandchildren did not live nearby. A holder of a WiseWage account could send a pre-cleared check (with Varo Money), transfer money electronically via direct send, or use a popular money transfer app (Venmo, PayPal, Zelle, et al).

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Adam Rust has worked to defend consumers against harmful financial practices since 2005. He has written extensively about overdraft fees, payday lending, credit insurance, student loans, prepaid debit cards, high-cost installment loans, and subprime mortgage lending. The New York Times interviewed him when it reported on the CFPB's rulemaking on prepaid debit cards; subsequently, his research paper framed the debate on consumer protections.

He serves on the Board of the US Faster Payments Council. He is Director of Research at Reinvestment Partners in Durham, North Carolina. He is the author of BankTalk. He is the author of "This is My Home: Challenges and Opportunities of Manufactured Housing" and has testified to Congress on how to redress some of the problems with manufactured housing. See more on his LinkedIn profile.