The fintech’s are coming and they are probably already in a home near you!
While I deliberately wanted the foregoing introduction to sound alarming, this is just me poking fun.
The increasing popularity of financial technology companies like Wealthsimple, EQ Bank, KOHO and STACK is good news for consumers who are cashing in on great rates and lower banking fees.
Read on to learn about what these hybrid bank accounts have to offer to Canadians.
Hybrid Bank Accounts in Canada
In 2019, 76% of Canadians conducted most of their banking online. So, the rise of digital banks and hybrid online accounts appears to be a natural evolution of the banking and financial industry as a whole.
EQ Bank Savings Plus, Wealthsimple Cash, and KOHO Save are hybrid accounts that combine savings and chequing features in ways we haven’t seen before.
While online-only banks like Tangerine and Simplii have been paying interest on chequing accounts for some time, a hybrid account takes convenience a step further.
They offer a more fluid approach to saving, spending, investing and banking in general.
If you keep a high chequing balance at your traditional bank in order to avoid the expensive monthly account fees, you now have alternatives.
1. EQ Bank Savings Plus
EQ Bank is the online banking arm of Equitable Bank, a Schedule I bank in Canada.
Their EQ Savings Plus account is a hybrid account that allows you to deposit money, make bill payments, send unlimited e-transfers and earn a high-interest rate.
Here are some of its top features:
- A high-interest savings rate of 1.50%…this is one of the best non-teaser rates you will find in Canada (also offers 2.30% on TFSA and RRSP accounts!)
- No monthly account fees
- Unlimited free bill payments and electronic fund transfers
- Unlimited free Interac e-Transfers
- No minimum balance required
- Cheap international money transfers
- Deposit protection by the Canada Deposit Insurance Corporation (CDIC)
- Joint accounts available
You will be hard-pressed to find better interest rates in Canada that are not promotional or only available for a limited period of time.
Note: This account is not available in Quebec. There is also a maximum balance of $200,000 per customer.
2. Wealthsimple Cash
Wealthsimple is Canada’s most popular online wealth manager with more than $5 billion in assets under management.
The company offers low-fee investing in registered and non-registered accounts; a free online brokerage service, online tax returns, and more recently, a fee-free cash account.
Wealthsimple Cash is a hybrid saving and spending account that offers:
- A high-interest rate of 0.75%
- No monthly account fees or minimum balance
- Free e-Transfers, bill payments and ATM withdrawals
- No foreign transaction fees
- A fancy tungsten metal debit/prepaid card
Some of the features of Wealthsimple Cash are not yet active and are expected to be rolled out soon. The account is available in all provinces and territories of Canada.
Note: Your Wealthsimple Cash account is protected by the Canadian Investor Protection Fund (CIPF) up to $1,000,000 against insolvency. The cash in your account is held in trust at two of Canada’s biggest banks, however, it is not covered by the CDIC.
3. KOHO Save
KOHO is one of the most popular free online chequing accounts in Canada.
Along with its snappy prepaid Visa and app, KOHO offers access to a bunch of perks you won’t find anywhere else, including a 0.5% to 2% cash back reward on all purchases.
When you sign up for an account and enter the promo code CASHBACK, you get a bonus of 1% cash back for 90 days.
KOHO Save is the upcoming feature being introduced by KOHO and it will offer a high interest rate on your entire balance in addition to:
- 0.5% – 2% cash back on debit purchases
- No monthly fees on a regular account
- Free transactions and e-Transfers
- CDIC protection up to $100,000
- A top-rated budgeting phone app that has a 4.8/5 rating on the App Store
- Automatic savings via Roundup
- Joint accounts
- Bonus cash back when you refer friends
- Choice of a fancy or metal Visa card.
Note: The custodian for KOHO Save accounts will be Canadian ShareOwner Investments, a IIROC-regulated entity that is also CIPF-insured. This account is not covered by CDIC, similar to Wealthsimple Cash.
Open a KOHO account and use the promo code “CASHBACK“
EQ Bank Savings vs. Wealthsimpe Cash vs. KOHO Save
Interest Rates: Of the three, EQ Bank offers the highest interest rate at 1.50% (2.30% on TFSA & RRSP), followed by Wealthsimple Cash at 0.75%. KOHO Save is coming soon.
The savings rates available through these hybrid accounts beat anything on offer by the big banks. Even better, they are not teaser rates.
Flexibility: EQ Bank Savings, Wealthsimple Cash and KOHO Save already offer (or will offer) free and unlimited transactions, and electronic bill payments.
One-Stop Solution: When you bank with KOHO, you still need a separate bank for your investments (e.g. TFSA and RRSP accounts) as it does not offer these accounts. With EQ Bank, you can save inside a TFSA or RRSP account. With Wealthsimple, you can also invest in low-cost ETFs and get a $50 cash bonus when you open an investment account.
Insurance: EQ Bank keeps your funds at Peoples Trust, a CDIC-insured trust company. Wealthsimple and KOHO use Canadian ShareOwner Investments Inc., where your funds enjoy CIPF protection but not CDIC.
Other Features and Perks:
An EQ Bank Savings Plus account can be used to send money abroad via Transferwise.
KOHO pays you cash back on all purchases (0.50 – 2% depending on your account type) and you earn a bonus 1% cashback when you use the promo code CASHBACK during sign up. The KOHO app can automatically roundup and save your spare change.
Wealthsimple also offers a Roundup option that automatically invests your spare change and a free platform for trading stocks and ETFs, aka Wealthsimple Trade.