Given the current state of the economy, we’re all trying to stretch our savings. While high-interest savings accounts (HISA), with their attractive interest rates and low or non-existent fees, are a great tool to give funds a boost, they often lack the flexibility of a chequing account.
But now there’s a new flexible, high-interest earning banking product that’s starting to make a splash with saving-savvy Canadians: Say hello to the hybrid bank account.
A hybrid bank account combines the features of a high-interest savings account (HISA) and a chequing account into one convenient package. It offers the attractive interest rates typically associated with a HISA, along with the flexibility of daily usage akin to a chequing account. With a hybrid bank account, you have the option to let your money accumulate interest while also using it for various transactions such as debit payments, withdrawals, Interac e-transfers, bill payments, and more.
While fully hybrid bank accounts are still limited in Canada, here are some noteworthy options worth exploring.
KOHO offers a versatile solution that caters to various essential needs, depending on the chosen level of functionality. Its core product is a prepaid card, allowing users to add funds and make purchases at stores or withdraw cash from ATMs, similar to credit or debit cards. Since the card is prepaid, there’s no risk of accumulating high-interest debt, as spending is limited to the amount loaded onto the card.
With the free KOHO prepaid card, users can earn up to 5% extra cash back at partnered merchants. Alternatively, opting for the KOHO Extra version involves an annual fee of $84 (or $9/month), offering 2% back on groceries, food & delivery, and transportation, and 0.5% back on other categories. Spending with partners for KOHO Extra can yield up to 6% extra cash back. There’s also a middle-tier paid version called KOHO Essential.
Additionally, KOHO accounts allow users to earn competitive saving interest rates (up to 2.00%) on their entire account balance, comparable to the best high-interest savings accounts in Canada. Users can also use their KOHO accounts to pay bills and send unlimited free e-Transfers.
With no monthly account fees and offering one of the highest savings account interest rates in the country, EQ Bank’s Personal Account stands out as one of Canada’s top hybrid options. The account boasts an impressive 2.50%* standard interest rate (non-promotional), which increases to 4% with direct deposit setup. Additionally, you can utilize the EQ Personal Account for bill payments and benefit from free Interac e-Transfers®.
However, a notable drawback is that the EQ Personal Account does not include a debit card, which means there’s no option for direct merchant payments or quick access to cash through ATMs.
Interest is calculated daily on the total closing balance and paid monthly, with rates subject to change without notice.
Wealthsimple Save touts itself as a “zero-fee do-everything account,” offering a no-fee hybrid account with a competitive interest rate and chequing account flexibility. The account boasts unlimited free transfers between external bank accounts, along with no monthly fees or minimum balance requirements.
However, there’s a significant caveat with Wealthsimple Save—at least for now. Despite its launch in January 2020, many of its features remain unimplemented, with Wealthsimple not providing specific dates for their availability. These forthcoming features include free Interac e-transfers, direct deposits, pre-authorized debit, and bill payments. Additionally, a prepaid Visa card is set to serve as a debit card for ATM withdrawals, with Wealthsimple reimbursing any ATM fees. Furthermore, there are plans for no foreign exchange fees when using the card abroad.
Once all these features are implemented, the account is poised to become one of the best and most flexible hybrid accounts in Canada.
Hybrid bank accounts represent a relatively new product in Canada, primarily offered by non-traditional, online-only banks, credit unions, or innovative fintech companies like Wealthsimple. In contrast, traditional banks typically maintain separate savings and chequing accounts with low interest rates and high fees.
In Canada, the average interest rates for savings accounts are typically 0.05% or lower. While some banks may offer higher rates, they often come with promotional periods to attract new customers or require a substantial minimum balance to qualify—funds that could potentially yield better returns in a High-Interest Savings Account (HISA) or investment account.
Similarly, traditional banks’ chequing accounts usually offer minimal to no interest and impose monthly account fees, unless customers maintain a significant minimum balance.
In contrast, hybrid accounts offer competitive interest rates typically ranging between 0.9% to 2% (standard rates, not promotional) without charging fees, allowing unlimited transactions, and having no minimum balance requirements.
Pros:
Cons:
For those comfortable with online-only banking, the straightforward, high-yield advantages of a hybrid account are appealing. However, it’s worth mentioning that several hybrid accounts in Canada may not provide the complete functionality of a traditional chequing account. As a result, you may need to maintain at least one chequing account with another institution to fulfill all your banking requirements. For further information, refer to the specific account reviews above.
If you prefer the in-person experience of brick-and-mortar banks and feel uneasy about online banking, a hybrid bank account may not align with your banking preferences. Additionally, some individuals prefer consolidating all their banking products, including accounts, mortgages, investments, and credit cards, with a single bank for the sake of convenience.
Hybrid accounts undoubtedly offer a plethora of benefits and are poised to evolve further as additional features become accessible across Canada. For those comfortable with embracing fully digital banking, this presents an opportunity that shouldn’t be overlooked.
In my view, hybrid accounts represent the solution many Canadians have been anticipating. With attractive interest rates facilitating savings growth and the flexibility akin to a chequing account, minus the concerns about fees, it’s a compelling option. Ensure you grasp the features of your preferred hybrid account and seize the opportunity it presents!
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