First there were the big banks. Then came challenger banks. Turns out, there’s room for more competition—and financial service apps like Koho are answering the call.
Photo courtesy of KOHO
Nowadays, consumers can shop around for the low- or no-fee accounts, competitive interest rates, and additional features they want. And banks aren’t the only ones delivering financial services to Canadians. Fintechs, which integrate technologies into the financial sector, have empowered developers and inspired those on the vanguard to rethink financial services altogether. One such product is Koho, a financial service app Canadians can use for spending, saving and budgeting.
Think of Koho’s standard savings account as a spending account with pretty good interest (compare Koho’s 1.2% on your entire balance with traditional banks’ standard 0.05%). It has no fees, no matter how much money you hold. To get that rate, you’ll need to set up a regular direct deposit to your Koho account (your paycheque or a portion of it; a government cheque; or even a PayPal deposit), and then opt into earning interest inside the app. You can use it in tandem with a traditional account, or use the app to set funds aside for specific savings goals and keep some funds readily available to cover expenses.
When you download the free Koho app, you’ll be asked to register and verify your identity. You can begin using Koho right away, by loading funds into your account using direct deposit or Interac e-transfer. You receive your physical Koho card in the mail, but you don’t need to wait to start charging it. You can make online purchases immediately using your account number. And you can add it to your Apple Wallet and Google Pay right away. Your Koho card works everywhere and is fully integrated with the app.
This is an ideal service for anyone wanting to keep things simple: It’s a savings account with a healthy interest rate with the ability to use it like a pre-paid Mastercard. Other banks typically offer clients a chequing account with a lower interest rate and a savings account with a higher interest rate, encouraging to save in one account and spend from another. But with Koho, you can create savings goals with and even lock money up in “the vault” on the app.
Deposited money is held by the People’s Trust Bank which, like the big five banks, is insured by the Canadian Deposit Insurance Corporation (CDIC). This means that your money, up to $100,000 per account, is protected in the event that the financial institution fails. (The People’s Trust Bank was established in 1961.) Plus, you can reach the Koho support team through an in-app chat or by phone, 21 hours a day, seven days a week. (Night owls can leave a message from 4 a.m. to 7 a.m., and receive a response when customer support is back on duty.)
Here’s what you would get access to when opening a Koho account.
Your spending account is actually a hybrid spending, savings and credit account. You can use it to pay bills and receive government payments, including CERB, through direct deposit. When you make purchases, you earn a minimum of 0.5% cash back. You can also use it as a savings account and your money will earn 1.2% interest when you set up direct deposit, which is significantly higher than a typical savings account. Actually, it’s more in line with the rates of high-interest savings accounts (1% to 1.5%).
When you sign up for your Koho account you will be able to select your card in one of four colour combinations. There is no hard credit check when you register, so that temporary app are done when you register, therefore your credit score is not temporarily affected.
Before it arrives in your mailbox, add it to your cellphone wallet like noted above. The credit card works like a preload card. You transfer your spending money and use it to shop. While your card has all the power of the credit card, you can only spend what is in the account. Stick with the free card or show off your style with a metal card for a fee.
Spending more than you can afford, particularly if you’re using a credit card, can be a costly mistake. With Koho, you preload your spending money so there are no surprises. You receive balance updates after every purchase. The app’s spending insights will help you plan, and you can access financial advice on the Koho blog.
As a hybrid savings and spending account, you’ll save a little extra when you spend with Koho. Bump up the base rate of 0.5% cash back with special merchant offers called PowerUps. You can also open a Premium account and get 2% back (more on that below). And you can enable RoundUps in the app to save your spare change to the nearest $1, $2, $5, or $10 on every purchase.
If your credit score is holding you back, Koho can help. Credit Building costs $7 per month over 6 months, and is withdrawn from your spending account. Koho reports to TransUnion and your timely payments contribute to your score. Essentially, your fee works like a loan payment, so when you pay it monthly, Koho is reporting that you are paying it back. Timely loan repayments are one of the basic ways to improve your credit score, and this tool lets you do it in a very affordable way.
Koho does not charge bank fees, and there are no minimum deposit requirements.
For those who want a little bit more, the Koho Premium account offers a solution. The Premium account gets you a boosted rate of 2% back on eating and drinking, groceries and transportation (and a base rate of 0.5%). Additionally, you get one free international ATM withdrawal per month (worth $2 to $3) and pay no foreign exchange fees on purchases made outside your local currency—a savings of between 2.5% and 3%. Bonus: you also get access to free one-on-one financial coaching. The Premium account costs $84 annually, or $9 a month. Not sure you want to commit to the Premium service? Koho offers a 30-day trial.
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