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KOHO 5% HISA for $4 month?
March 22, 2024
8:28 am
InterestThis
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Saw this, and was wondering what is the catch? Anyone ever try it?

KOHO 5% HISA for $4 month https://www.koho.ca/essential/

Seems like the Dep/Wtd is highly restricted.
https://help.koho.ca/en/articles/3063291-all-koho-account-velocity-limits

March 22, 2024
9:24 am
HermanH
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Doesn't look like there is any CDIC or CU insurance.

March 22, 2024
9:32 am
InterestThis
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It does have the standard 100K CDIC https://www.koho.ca/essential/

But the deposits/WTD are restricted. But in theory getting 5% could be worth paying a little, as $4 a month is the interest on $1000.
but there has to be a catch somewhere? As their target market seems to be "credit building".
They have a giant list of limits, so not a good sign there. But there might be something to this account?

March 22, 2024
9:39 am
HermanH
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On the webpages for most FI, they have a separate link for CDIC coverage. None exists for KOHO. I went to CDIC and entered their name and nothing comes up.

https://www.cdic.ca/your-coverage/list-of-member-institutions/

Perhaps they use another name for CDIC coverage? Otherwise, I am not certain they have CDIC coverage.

March 22, 2024
9:47 am
InterestThis
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Looks like KOHO uses People's Trust like Wealthsimple
https://www.koho.ca/learn/safe/

March 22, 2024
9:57 am
InterestThis
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March 22, 2024
6:31 pm
Doug
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InterestThis said
a few people are talking about it here

Thoughts on Koho's 5% interest on their $4 per month banking account?
byu/MainlyPixels inPersonalFinanceCanada

  

No thanks. Highly gimmicky. Very big bank likey. Only benefits them because think about it, interest rate is subject to change daily, but you don't get that monthly fee back each month if they drop the rate.

Let's say you put in $10,000, and assume you collect 5% for a full year, you earn $500 before taxes, but you pay $48 in service charges for the year, so effectively your pretax adjusted annual yield is 4.5%, but that's your pretax yield.

Cheers,
Doug

March 22, 2024
9:12 pm
Norman1
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HermanH said
On the webpages for most FI, they have a separate link for CDIC coverage. None exists for KOHO. I went to CDIC and entered their name and nothing comes up.

https://www.cdic.ca/your-coverage/list-of-member-institutions/

Perhaps they use another name for CDIC coverage? Otherwise, I am not certain they have CDIC coverage.

KOHO doesn't have CDIC coverage because KOHO Financial Inc. is not a CDIC member:

Is KOHO CDIC Insured?

A common question we get is whether or not KOHO is CDIC insured. We completely understand that you want to make sure your funds are safe with us. KOHO itself is not CDIC insured. In the unlikely event that KOHO fails, your funds will be returned to you by our partners who hold your funds.

Are Accounts Earning Interest* CDIC Insured?
Yes! All cash balances from your account(s) earning interest* are held in trust at a Canada Deposit Insurance Corporation (CDIC) (https://www.cdic.ca/about-us/) member institution. Coverage is available for eligible deposits.

The detail about some balances being held in trust with a CDIC member doesn't mean much. CDIC is not going cover funds in trust going missing unless the funds are gone because the CDIC member fails.

One can see that nuance in operation when lawyers trust accounts come up short. Doesn't matter if the lawyers trust account is with a CDIC member when the account is short because of one of the partner lawyers takes off with the money.

March 23, 2024
7:51 am
Norman1
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According to section 3(c) of the cardholder agreement, the funds are placed with investment dealer and CIPF member WealthSimple Investments Inc. when the KOHO Earn Interest option is chosen:

KOHO USER TERMS

  • “Card” or “KOHO Card” means a plastic or virtual KOHO Prepaid Mastercard® or KOHO Premium Prepaid Mastercard.
  • “KOHO”, “we”, “us” or “our” means KOHO Financial Inc.


I. KOHO CardHolder Agreement — Mastercard

3. ADDITIONAL KOHO CARD FEATURES AND OPTIONS


(c) KOHO Earn Interest: This section only applies to users who have opted into KOHO Earn Interest. If you have opted into KOHO Earn Interest, your Card balance is held with our referral partner Wealthsimple Investments Inc. (“Wealthsimple”). Under the referral arrangement with Wealthsimple, KOHO receives an interest rate spread on amounts that KOHO users fund to their Save account. KOHO, in turn, may apply some of the interest rate spread we receive to users' Save accounts.

March 23, 2024
9:49 am
InterestThis
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Yes looks similar to the Wealthsimple structure, and if they use WS then that is with People's Trust.
But for a larger deposit, and if nothing else is available, it might be usable. But anything with such a long list of WTD restrictions is last on the list.
But looks like they are just essentially a Wealthsimple client, all they do is deposit more than 500K into Wealthsimple, and get the 5% rate, and have a referral deal where they take a cut of the interest rate spread.
And of course they take their fees, so it makes sense in that regard.

March 23, 2024
11:41 am
The Rock
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Given the deposit/withdrawal restrictions, how would one go about depositing a large amount of say $100k? From what I can tell you would need to make 20 $5000 e-transfers with a monthly maximum limit of $20000. Meaning it would take you five months to load the $100k, unless there's another way. They mention direct deposit but that seems like something you would set up with your employer.

March 24, 2024
6:25 am
InterestThis
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All good points, I don't know if you can deposit an
EFT into KOHO but maybe they are calling that a Direct Deposit? That looks to be 20K max per transaction?
So KOHO looks like a "kids table account" but anyway just saw the 5% HISA.
KOHO are just using Wealthsimple, and their business model seems to be the monthly fees.
They do seem to have a free account called Easy at 3%.
So yes its dubious but its something.

June 9, 2024
12:00 pm
Lodown
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Seems there is now a way around any Fees. May be good for some.

https://www.koho.ca/essential/

June 9, 2024
12:44 pm
NorthernRaven
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Koho provides the prepaid debit Mastercard to Wealthsimple's Cash account offering, and Wealthsimple provides the "Save" CDIC interest component for Koho's offering. You can get the core bits of the pair from either source, although each may offer their own additional features - Wealthsimple CASH now has paper cheques available, for instance, and just does a straight 1% cashback instead of Koho's range of plans and cashback categories (looks like Koho Essentials is 1%, only on groceries, transportation/gas/, food/drink).

Oddly enough, Koho makes it easier to get that 5% rate than Wealthsimple. All Koho wants is your payroll deposit (or $1000 every month in deposits), while WS requires you to be a Premium customer ($100K in combined Wealthsimple investments and Cash = 4.5%) plus the payroll deposit (0.5% bonus), or a Generation customer (5%, no extra bonus available).

At 5%, both are pretty much passing through almost all the interest that WS is getting from their partner CDIC banks, so they are counting on making money on the rest of the stuff. There's likely to be an adjustment in those rates as the BoC heads down, since the banks are likely reducing the rates they are giving to bulk depositors like WS just like other deposit rates after the recent 0.25% BoC cut.

I don't use the Wealthsimple Cash card part, but I believe it has access to the entire balance of your Cash account (one reason I declined the card and turned the virtual card off). Koho's site mentions "loading" the card, but perhaps when you opt into the Save portion, it too has access to the Wealthsimple-provided deposits?

June 9, 2024
2:00 pm
Briguy
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Wealthsimple Cash now allows you to open up multiple savings accounts, so you can instantly transfer out most of the money from the account linked to the prepaid card, and transfer back in instantly as needed. ( same as EQ bank has been doing all along ).

June 9, 2024
2:54 pm
NorthernRaven
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Briguy said
Wealthsimple Cash now allows you to open up multiple savings accounts, so you can instantly transfer out most of the money from the account linked to the prepaid card, and transfer back in instantly as needed. ( same as EQ bank has been doing all along ).  

Ah, right, I remember seeing them send me something about multiple Cash accounts. I just use it as a lucrative 5% dumping ground and most of my transactions go through my VISA, so I haven't bothered with the card features.

June 9, 2024
5:51 pm
Doug
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I have a grandfathered $0 plan, which I don't use and will likely close. While you can get it for $0 now, I believe they've added a requirement for recurring direct deposit or minimum deposit credit of $500 per month to waive the monthly fee. While it is advertised like a combined chequing/savings account, for me, what I cannot square this with is with their mantra of being not a Big 5 bank, who charge monthly fees. Moreover, similar, no-fee products exist. And I say this as I know someone on their marketing team.

In any case, it's also worth noting they've hired former Tangerine & CannTrust Holdings CEO Peter Aceto to join their senior executive team to assist with their application to become a Schedule I chartered bank ("Koho Bank / Banque Koho") or incorporate a Schedule I chartered bank subsidiary ("Koho Bank / Banque Koho"), which isn't likely to become effective until 2025 at the earliest.

Cheers,
Doug

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