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.
The new Credit Building feature by KOHO makes improving credit not only possible but also highly affordable.
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.
KOHO prepaid cardholders can easily register for Credit Building through the Tools section of the app.
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.
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.
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.
KOHO cards boast no hidden fees, though there are a few limitations regarding transactions and balances. See the cards below for more details.
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:
*Conditions apply. Purchases must be made directly with the partner. Any purchases made through third-party sellers don’t qualify for this offer.
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.
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:
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:
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:
Insurance:
Other perks:
Transaction and balance limits:
Here is an overview of the essential account details you should know:
*Conditions apply.
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:
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:
Insurance:
Other perks:
Transaction and balance limits:
Here is an overview of the primary account details you should know:
*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.