Canada’s financial landscape is undergoing a transformation with the emergence of challenger banks and fintech companies like Neo Financial and KOHO. These institutions offer compelling alternatives to traditional banks, particularly for those seeking high-interest savings accounts, fee-free transactions, and cash-back rewards.
This comprehensive comparison dives into the nitty-gritty of both Neo Financial and KOHO, helping you decide which one aligns better with your financial goals.
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Financial Products Offered by Neo Financial and KOHO
Prepaid Credit Cards:
- Neo Money Card: This prepaid Mastercard functions like a debit card, with no monthly fees, no preloading requirement, and unlimited free transactions. It also offers instant cashback on purchases at Neo’s partner network. Key features include an average of 5% cashback on purchases, up to 15% cashback on initial purchases, a $20 welcome bonus, and access to a high-interest savings account.
- KOHO Mastercard: This card combines spending and savings functionalities with credit score monitoring and building features. It offers 1% unlimited cashback on groceries, restaurants, and gas, up to 5% cashback at partner retailers, 5.00% interest on the entire balance, and perks like automatic savings with Roundups, free credit score checks, and in-app 0% APR cash advances. While there’s a $0 monthly fee with a recurring direct deposit, there are fees for services like credit building.
Credit Cards:
- Neo Credit Card: This no-annual-fee card offers an average of 5% cashback at partner stores. It caters to those with fair or good credit and has a guaranteed minimum cashback of 0.50% on all purchases (with monthly maximums). There’s also a welcome offer of up to 15% cashback on first-time purchases and a $25 cash bonus. However, interest rates can be high, ranging from 19.99% to 29.99% for purchases and 22.99% to 31.99% for cash advances.
- KOHO (No Credit Card): KOHO doesn’t offer a traditional credit card, but their reloadable prepaid Mastercard functions similarly with cashback abilities and is accepted anywhere Mastercard is.
Savings Accounts:
- Neo Financial High-Interest Savings Account: Currently offering a 4.00% interest rate on your balance, calculated daily and paid out monthly, this high-interest savings account (HISA) can be combined with the Neo Money card for online and in-person purchases while earning cashback rewards.
- KOHO Earn Interest: This HISA boasts a competitive interest rate of up to 5.00% on your entire account balance, encompassing both spending and savings portions.
Credit Building:
- Neo Secured Credit: This product is designed for those new to Canada or aiming to build or establish credit. It functions like a regular credit card but requires an upfront security deposit that becomes your credit limit. As you use the card responsibly and make timely payments, your credit score improves.
- KOHO Credit Building: This optional add-on service costs $5 to $10 per month and helps improve or rebuild your credit score by reporting your payment history to credit bureaus.
KOHO vs. Neo Financial: A Breakdown
Cash Back Rewards:
- Neo Financial: Earns cashback with various cards (Neo Credit, Neo Secured Credit, Neo Money prepaid card). All offer an average of 5% cashback at thousands of retailers with a minimum average of 0.5% across all purchases. You can request the Neo Money card to spend directly from your Neo savings account.
- KOHO: Their free Mastercard offers up to 5% cashback on purchases, functioning like a debit card that eliminates interest charges.
Savings Interest:
- Both KOHO and Neo Savings Accounts boast competitive interest rates, with KOHO currently offering a slightly higher rate.
Convenience:
- Both are entirely digital, meaning no physical branches for in-person transactions. Customer support is available via email or chat, with Neo Financial adding phone support.
Referral Programs:
- Both KOHO and Neo Financial offer referral programs with rewards for referring others.
Fees:
- KOHO has a free basic account with additional service fees (e.g., credit building). Neo Financial’s basic credit card has no annual fee, but interest rates can be high.
Safety:
- Both KOHO and Neo Financial deposit funds in CDIC-member banks, ensuring deposit protection up to $100,000 per beneficiary.
Company Background:
- Neo Financial: Established in 2019 by the co-founders of SkipTheDishes, a Canadian food delivery service.
Additional Considerations
- Future Product Offerings: Both Neo Financial and KOHO are constantly innovating. Research their development pipelines to see which company aligns better with your future financial needs.
- Customer Service: While both offer online support, Neo Financial adds phone support, which might be crucial for some users. Research online reviews to gauge user experiences with customer service for each platform.
The Final Verdict
There’s no single “winner” in the Neo Financial vs. KOHO battle. Both platforms cater to different financial needs. Here’s a quick summary to help you decide:
- Choose Neo Financial if:
- You want a variety of credit and prepaid card options for maximized cashback rewards.
- Building credit is a priority (especially if you’re new to Canada).
- You prefer phone support in addition to online options.
- Choose KOHO if:
- You prioritize a high-interest savings account with a slightly higher rate (as of April 2024).
- You want a no-fee spending account with cashback rewards (suitable for debit card users).
- You travel frequently and would benefit from waived FX fees (with the Extra account).
By carefully considering your financial goals and preferences, you can choose the platform that best empowers you to manage your money effectively. Remember, you’re not limited to just one! Consider using both Neo Financial and KOHO to leverage the unique benefits each offers.