Meet the hybrid spending-savings accounts with interest rates as high as 2.45%

Click to play video: 'Money 123: Apps that help Canadians save' Money 123: Apps that help Canadians save
As online reporter Erica Alini explains, there are apps that can help you save without even thinking about it – Sep 15, 2018

There are chequing accounts, savings accounts — and then there are hybrid accounts.

The new accounts — offered by a collection of mostly fintech startups and credit unions vying for new customers — are billed as the best of both worlds. On the one hand, goes the pitch, consumers enjoy the flexibility of chequing accounts with features such as automatic bill payment and unlimited transactions. On the other hand, the accounts also come with some of the industry’s most competitive interest rates on deposits.

READ MORE: How to save an extra $100 a month – without even thinking about it

Online bank EQ Bank, for example, offers a hybrid account with features such as unlimited bill payments and free Interac e-transfers, no account fees and an eye-catching annual interest rate of 2.45 per cent, which may net you more than locking your money into a guaranteed investment certificate for a year.

Story continues below advertisement
Click to play video: 'Money 123: Insurance companies offer consumers deals for data' Money 123: Insurance companies offer consumers deals for data
Money 123: Insurance companies offer consumers deals for data – Jul 21, 2018

Wealthsimple, a robo advisor, recently announced the launch of a no-fee Wealthsimple Cash account that pays 2.4 per cent interest and comes with a tungsten cash card you can use to withdraw money from ATMs across Canada.

Mobile bank KOHO has a hybrid account linked to a reloadable prepaid Visa card that lets consumers track their spending and their progress towards multiple savings goals through an app.

Manulife Bank also has a hybrid chequing and savings account, called Advantage Account, and so does IC Savings, an Ontario credit union.

READ MORE: 7 common mistakes that explain why you never have enough money

Hybrid accounts are good news for many consumers, especially considering that surveys indicate many Canadians keep a relatively high balance in their chequing account, said Victoria Shinkaruk of financial products comparisons site

Story continues below advertisement
Click to play video: 'Money 123: Pros and Cons of DIY tax filing' Money 123: Pros and Cons of DIY tax filing
Money 123: Pros and Cons of DIY tax filing – Apr 13, 2019

Some do that in order to avoid minimum balance fees, while others just aren’t in the habit of transferring excess cash to a high-interest savings account. In any case, there’s evidence that many consumers have significant cash lingering in chequing accounts where it doesn’t earn interest or, worse, is subject to fees, which amounts to negative interest, Shinkaruk said.

And even when it comes to savings accounts, a cursory search through the Ratehub website indicates many currently offer below-inflation interest rates.

But if you normally use both a chequing and a savings account and find that keeping the two separate helps your budget, a hybrid account may not be appealing, Shinkaruk said.

“To mentally separate [your cash] into different buckets is a good savings technique.”

And if you can’t save and are constantly drawing down on your account balance, you’re not really taking advantage of those high interest rates.

Story continues below advertisement

READ MORE: Need cash in a hurry? Here are the best and worst ways to get it

Still, nothing prevents consumers from using hybrid accounts like more traditional savings accounts. And with KOHO, the app helps users keep spending and saving separate without the need for two accounts.

If you are considering opening up a hybrid account, Shinkaruk advises doing your research before you choose.

Here are a few things to consider:

Interest rates

While hybrid accounts generally have competitive interest rates, there is considerable variation. Manulife Advantage Account, for example, currently has an interest rate of just 1.15 per cent.

Whenever comparing interest rates, Shinkaruk recommends looking at how much a certain balance will earn you throughout the year. Some accounts have promotional high interest rates that only last for a short period of time.

Click to play video: 'Money123: A lesson in student banking' Money123: A lesson in student banking
Money123: A lesson in student banking – Aug 31, 2019

ATM access

Not all hybrid accounts come with a card that allows you to get cash out of an ATM. For the ones that do, take a look at the network of ATMs you’d have access to without paying a fee — or whether the account will reimburse those fees.

Story continues below advertisement

Wealthsimple Cash, for example, says it will pay back ATM fees up to a monthly limit. The company told Global News it will provide more details on what the limit is once the feature becomes available.


Hybrid accounts aren’t always fee-free. The Manulife Advantage Account, for example, waives a number of fees only if you keep a minimum balance of at least $1,000. The IC Savings Perfetto Account has a monthly flat fee, while the KOHO Premium Visa card, which gives you two per cent cash back on select purchases, has fees of $84 per year or $9 a month.

Click to play video: 'Money 123: Canadians could be losing a lot to investment fees' Money 123: Canadians could be losing a lot to investment fees
Money 123: Canadians could be losing a lot to investment fees – Jan 12, 2019

Option to have a joint account

Not all hybrid accounts can be used as joint accounts. If you bank like you tango, check ahead.

Story continues below advertisement

Is your money insured?

You should also take a look at whether and how your money is protected. EQ Bank and Manulife Bank deposits, for example, are covered by Canada Deposit Insurance Corp. (CDIC), a federal Crown corporation that backs deposits of up to $100,000 per eligible account.

Deposits at credit unions like IC Savings are insured provincially.

Wealthsimple Cash accounts do not have CDIC insurance. The company said it deposits money in trust with federally regulated schedule I banks that are “chosen for their safety and security.”

Funds loaded onto KOHO’s prepaid card aren’t covered by CDIC insurance, either.

Sponsored content