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A good credit score can help you land a great apartment, finance a car, secure a top-tier rewards credit card, or get a better mortgage rate. But new to credit consumers and those with less favourable ratings may find it challenging to get approval or pay higher interest rates.

The road to building or rebuilding credit can be a long one and usually starts with a credit card. Great products exist to assist with this already, though many come with high fees or large deposits.

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The new Credit Building feature by KOHO makes improving credit not only possible but also highly affordable.

Introducing Credit Building by KOHO

KOHO recently launched its new Credit Building feature on February 9, 2021, to help build users’ credit scores for a budget-friendly fee of $7 a month for six months — making it a low-cost and secure option.

How it works

KOHO prepaid cardholders can easily register for Credit Building through the Tools section of the app.

  • Step one: The user inputs their details, and KOHO pulls their credit score.
  • Step two: KOHO withdraws a $7 fee and issues a line of credit for the user. The cardholder’s risk level determines the balance of the line of credit.
  • Step three: KOHO removes a portion of this balance every month and reports it to TransUnion, one of Canada’s two main credit bureaus. This “repayment” will have positive impacts on the user’s credit score. KOHO also continues to withdraw the $7 monthly fee until the end of the six-month program.

After six months, the Credit Building subscription will end, but users can repeat this process as often as they find it useful.

This feature is currently not available for residents of Quebec, Saskatchewan, and New Brunswick.

What users need to know

Users can follow along and track their credit score from within the Credit Building page. However, it is important to note that there is no guarantee that the user’s credit score will improve. There are many factors credit bureaus use to calculate credit scores beyond payment history, including credit utilization ratio and negative information.

On the other hand, making payments on time, only applying for credit when necessary, and other positive credit habits can increase a person’s rating and help them reach their financial goals faster.

Related read: Canadians Can Now Use Rent Payments Toward Their Credit Scores

Registering for the Credit Building program does not impact users’ credit scores, as it typically would for a short while after applying for other forms of credit.

However, not ensuring there is $7 in the KOHO account to cover the monthly fee can result in a missed payment, which may hurt users’ scores. KOHO advises users to keep $7 in their account ($42 over the six months), not including the Vault section, to guarantee payments.

Lastly, KOHO solely reports to TransUnion at this time. That means users may see a different credit score from other credit bureaus or banks.

Click here to skip down and learn more about KOHO prepaid cards.

About KOHO

KOHO offers prepaid cards with similar benefits to both a debit card and credit card. But it also has a few differences that you need to know.

The money you load to your account is already yours, so you will never take on debt or owe interest — much like a debit card.

The card rewards you for your spending and offers cash back for your purchases. Cardholders can also use it anywhere Visa is accepted — much like a credit card.

However, prepaid cards don’t require a credit check to apply and don’t report to credit bureaus in Canada. This detail means, unlike a credit card, users won’t build credit or improve their credit score with this type of account. Unless they are using the Credit Building feature, that is.

The card can help members track their spending and see real-time insights into their transactions, all while earning cash back. The KOHO app offers balance updates, free financial coaching, transaction notifications, and more, making budgeting easy.

Fees

KOHO cards boast no hidden fees, though there are a few limitations regarding transactions and balances. See the cards below for more details.

Monthly account fees

$0.00

Non-sufficient funds (NSF) fees

$0.00

e-Transfer fees

$0.00

Interest charges

$0.00

PowerUps

PowerUps refer to the cash back you can earn as you spend. Cardholders can earn extra PowerUps when they refer a friend to KOHO, shop at specific partners, or upgrade their standard account to KOHO Premium. These bonus PowerUps are in addition to the cash back cardholders already earn from their KOHO card.

Here is an example of the PowerUps cardholders can earn by shopping with partners:

KOHO partner*

Merchant PowerUps

Indigo

+1%

Pizza Pizza

+3%

Toronto Life

+5%

*Conditions apply. Purchases must be made directly with the partner. Any purchases made through third-party sellers don’t qualify for this offer.

RoundUps

Cardholders can choose to round up every purchase to the nearest dollar to save money faster. KOHO calls these RoundUps.

Purchases can be rounded to the nearest $1, $2, $5 or $10 value, and the RoundUps are set aside in the Savings tab. Users can cash their money out at any time.

Here is an example:

A cardholder buys a coffee for $2.25 and has a $2 RoundUp. After this purchase, $1.75 would go toward savings.

However, cardholders only have one account. The separation between Savings, RoundUps and Spendable cash is a visual representation. If users were to make a large purchase of a higher value than the money in their Spendable category, the transaction would use funds from the other sections. There is one exception to this rule, though — the Vault.

Vault

The Vault feature is only available for personal accounts. Cardholders can store money in the Vault, and they can’t use the funds until they transfer them back to the Spendable section.

Here is an overview of the most popular KOHO prepaid cards:

KOHO cards

Prepaid card

Welcome offer

Annual fee

1. KOHO Premium Prepaid Visa Card

Get an additional 1% cash back on all purchases for 90 days. Conditions apply.

$84/year or $9/month

2. KOHO Standard Prepaid Visa Card

Get an additional 1% cash back on all purchases for 90 days. Conditions apply.

$0

KOHO Premium Prepaid Visa Card

The KOHO Premium Prepaid Visa Card offers members 2% cash back in three main categories and 0.5% back on everything else, for a low annual fee of $84 a year.

According to our Best of Finance methodology, the average Canadian will earn $285 cash back in the first 12 months.

Credit score requirement for approval:

Applicants do not require a credit score to apply for this card.

Annual fee:

$84/year or $9/month

Limited time offer/bonus:

Get an additional 1% cash back on all purchases for 90 days when you sign up for the KOHO Premium Prepaid Visa Card with a referral code and when you refer a friend. You could earn up to 10% cash back for 90 days.

Offer expiry date: N/A subject to change without notice

Rewards:

  • Earn 2% cash back on grocery, dining, and transportation purchases, including rideshare and parking.
  • Earn 0.5% cash back on all other purchases.

Earning potential:

How does this card stack up to other rewards credit cards? We crunched the numbers using our Best of Finance methodology to see how much an average Canadian could earn over a 12-month period.

Rewards earned over a 12-month period = $369
Annual fee = $84
Total earned over the first year (rewards minus annual fee) = $285

You can redeem your points for:

  • The cash back you earn will appear in your Savings tab within two to three business days of the purchase — that is fast.

Insurance:

  • Price protection

Other perks:

  • Pay no foreign exchange fees when making purchases abroad or online through foreign merchants.
  • Earn 6% merchant cash back with select premium retailers.
  • Make one free withdrawal at ATMs outside of Canada each month.
  • Access free personalized financial coaching.
  • Save money with the card’s price protection feature and ensure you are always paying the lowest possible price.
  • Enjoy priority user support and access KOHO agents quickly.

Transaction and balance limits:

Here is an overview of the essential account details you should know:

Maximum account balance

$40,000

Transaction limits

20 transactions daily

$3,000/transaction

$3,000/day

$40,000/month

ATM limits

5 transactions daily

$400/withdrawal

$800/day

$4,000/month

Load limits (includes all transaction types adding funds to the account)

40/day

120/month

$20,000/day

$45,000/month

Direct deposit limits

4 direct deposits daily

60 direct deposits monthly

$10,000/day

$20,000/month

e-transfer limits (outbound)

$3,000/transfer

$3,000/day

Pre-authorized debit limits

20/month

*Conditions apply.

KOHO Standard Prepaid Visa Card

Apply for the KOHO Standard Prepaid Visa Card to earn 0.5% cash back on all your purchases.

According to our Best of Finance methodology, the average Canadian will see $180 cash back in the first year.

Credit score requirement for approval:

Applicants do not require a credit score to apply for this card.

Annual fee:

$0

Limited time offer/bonus:

Get an additional 1% cash back on all purchases for 90 days when you sign up for the KOHO Standard Prepaid Visa Card using a referral code and when you refer a friend. You can earn up to 10% cash back for 90 days.

Offer expiry date: N/A subject to change without notice

Rewards:

  • Earn 0.5% cash back on all purchases, with no limit to how much you can earn.

Earning potential:

How does this card stack up to other rewards credit cards? We crunched the numbers using our Best of Finance methodology to see how much an average Canadian could earn over a 12-month period.

Rewards earned over a 12-month period = $180
Annual fee = $0
Total earned over the first year (rewards minus annual fee) = $180

You can redeem your points for:

  • The cash back you earn will appear in your Savings tab within two to three business days of the purchase.

Insurance:

  • There is no insurance coverage on this card.

Other perks:

  • Earn up to an extra 5% cash back at select retailers.
  • Take advantage of the Early Payroll feature and access your payroll up to three days early.
  • Access free personalized financial coaching.
  • Easily lock your card from the KOHO app.
  • Enjoy low foreign exchange fees of 1.5% — typically around 2.5% to 3%.

Transaction and balance limits:

Here is an overview of the primary account details you should know:

Maximum account balance

$20,000

Transaction limits

15 transactions daily

$3,000/transaction

$3,000/day

$30,000/month

ATM limits

5 transactions daily

$300/withdrawal

$600/day

$3,000/month

Load limits (includes all transaction types adding funds to the account)

20/day

60/month

$20,000/day

$40,000/month

Direct deposit limits

4 direct deposits daily

60 direct deposits monthly

$10,000/day

$20,000/month

e-transfer limits (outbound)

$3,000/transfer

$3,000/day

Pre-authorized debit limits

20/month

*Conditions apply.

Rates, product information, and reward estimates are subject to change at any time and do not constitute financial advice. This post was not sponsored. The views and opinions expressed in this review are purely those of RATESDOTCA. Information in this article is accurate as of the date of this posting, February 19, 2021. Read our full disclaimer.

Hayley Vesh

Hayley Vesh is a creative, resourceful, and knowledgeable content producer who is passionate about financial literacy, storytelling, and generating ideas. She writes about credit cards, savings, debt management, and personal finance. In her spare time, Hayley can be found wandering in the woods, hunting for second-hand treasures, or curled up with a steeped tea and a good podcast.

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