What's the best prepaid credit card in Canada? There are a few choices at your disposal.
If you've never had a prepaid credit card before, you may be surprised at just how much value they have to offer. Once you dig a little deeper, you may wonder why you'd ever use a debit card from a regular bank again.
Key Takeaways
- There are many issuers of prepaid cards in Canada, with KOHO and EQ Bank being 2 of them.
- KOHO offers 3 different levels of their prepaid card, with varying fees, earn rates, and interest rates.
- EQ Bank offers 1 prepaid card that earns cash back on all purchases and charges no foreign exchange fees.
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What are prepaid credit cards?
Prepaid cards are reloadable cards you use to pay for purchases online or in-store, similar to how you would use a credit card or debit card.
Prepaid credit cards aren't really credit cards at all, because the card issuer isn't actually extending any credit to you – the money you're able to spend through the card is money you preloaded onto it. This is why they're called "prepaid."
Prepaid cards are more convenient and secure than using cash, and the best prepaid cards even let you earn rewards when you use them.
There are a few benefits to using prepaid cards over credit cards and debit cards.
| Card Type | Pros | Cons |
|---|---|---|
| Prepaid cards | * Easy to get * Doesn't require a credit check * Spending is limited to what you load on your card, so no worries about overspending or overdraft charges * Some prepaid cards let you earn rewards * Usually low or no annual fee * Can be used to make purchases online, like a credit card * No risk of racking up high-interest debt * Many will let you use any ATM for no fee | * Doesn't help improve your credit score, unlike secured credit cards * Limited perks and insurance |
| Credit cards | * Many have top-notch welcome bonuses and rewards * Many have valuable insurance and perks packages * Will help build your credit score if used responsibly | * Can be difficult to qualify for, with high credit score and income requirements * High annual fees for premium cards * Can lead to spiralling high-interest debt if you overspend and are unable to make your payments |
| Debit cards | * Easy to get without a credit check – most chequing accounts come with one for free | * Doesn't help build credit * Very few let you earn rewards * Acceptance can be limited – often can't be used for online purchases * Few additional perks or insurance coverages * Not prepaid, so you run the risk of overspending or getting dinged with overdraft charges * Some will have high fees for using out of network ATMs |
As you can see, prepaid cards are convenient, secure, and versatile. Some even offer benefits similar to typical credit cards, yet they ensure you stay within your budget as if you were spending cash. What's not to love?
But the question here is: Who has the better prepaid card? KOHO or Stack?
What are KOHO and EQ Bank?
If you're curious as to who these banks are, here are the quick-hitting facts.
KOHO
KOHO was founded in 2014 and has partnered with Mastercard to offer prepaid cards to Canadian consumers. Cash balances in KOHO Earn Interest accounts are covered by CDIC insurance up to $100,000, which is free and automatic.
KOHO is headquartered in Toronto.
EQ Bank
EQ Bank was founded in 2016, and is a division of Equitable Bank. It's an online bank known for savings accounts and GICs, but it's recently added prepaid cards as part of its basic savings account.
EQ Bank also has its headquarters in Toronto.
KOHO Prepaid Mastercards vs. EQ Bank Prepaid Mastercard at a glance
Let's get down to business and see who will win the KOHO vs. EQ Bank battle. With KOHO, there are 4 levels of their prepaid card to choose from.
| Feature | KOHO Essential Mastercard | KOHO Extra Mastercard | KOHO Everything Mastercard | EQ Bank Card |
|---|---|---|---|---|
| Monthly Fee | $4 | $9 | $14.75 | $0 |
| Welcome bonus | after the first purchase | after the first purchase | after the first purchase | No welcome offer at this time |
| Rewards | * 1% cash back on groceries, restaurants, and transportation * Earn additional cash back with partner retailers | * 1.5% cash back on groceries, restaurants, and transportation * 0.25% cash back on all other purchases * Earn additional cash back with partner retailers | * 2% cash back on groceries, restaurants, and transportation * 0.5% cash back on all other purchases * Earn additional cash back with partner retailers | * 0.5% cash back on all purchases |
| Foreign transaction fees | 1.5% | None | None | None |
| Interest Rate | Up to 2% | Up to 2.5% | 3.5% | 3.3% |
When it comes to KOHO, you're paying a varying monthly fee for increased rewards and interest earned on your prepaid balance.
One bonus with KOHO – you can switch between these levels when you want to. If one level doesn't work for you, it's easy to try out a different one.
KOHO Prepaid Mastercards in detail
Here's what KOHO Prepaid Mastercards have to offer. A lot of the basics are the same with all 4 levels. You'll earn cash back on purchases, earn interest on your balance if you have a direct deposit set up, and can save on foreign exchange fees.
$100 GeniusCash + Up to 1% cash back on purchases + 2% interest on your balance.*
The levels of cash back you'll get or the interest will vary based on the monthly fee you're paying.
So to start, here is the monthly fee you'll pay for each one:
- KOHO Essential Mastercard – $4
- KOHO Extra Mastercard – $12
- KOHO Everything Mastercard – $14.75
We'll start off with the rewards you'll earn for each level, with an overall average earned based on spending $2,000 per month. As a note, these numbers don't include what you could potentially earn with KOHO's retail partners, so they could end up being higher.
| KOHO Essential Mastercard | KOHO Extra Mastercard | KOHO Everything Mastercard | |
|---|---|---|---|
| Cash Back Earned | * 1% cash back on groceries, restaurants, and transportation | * 1.5% cash back on groceries, restaurants, and transportation * 0.25% cash back on all other purchases | * 2% cash back on groceries, restaurants, and transportation * 0.5% cash back on all other purchases |
| Average Earn Rate | 0.5% | 0.8% | 1.1% |
At the higher end, you get something respectable. But the first tier leaves a lot to be desired. It's very rare in the marketplace to not be able to earn rewards everywhere you shop.
You can also earn interest on your balance. To unlock this feature, you need to have a direct deposit set up on your account.
Here's the interest you'll earn for each card.
| KOHO Essential Mastercard | KOHO Extra Mastercard | KOHO Everything Mastercard | |
|---|---|---|---|
| Interest Earned | * 4.5% on the first $500 * 2% afterwards | * 4.5% on the first $1,000 * 3% afterwards | 3.5% |
These interest rates are really good.
Finally, all these cards can help you save on foreign exchange fees. Here are the fees for each level:
- KOHO Essential Mastercard – 1.5%
- KOHO Extra Mastercard – None
- KOHO Everything Mastercard – None
Other KOHO products
KOHO has more to offer than rewards and interest. They have a few additional addons you can take advantage of for varying fees.
Credit Building
The biggest one is Credit Building. While prepaid cards have no bearing on your credit file, KOHO came up with this to help those with lower credit scores.
There are 2 versions of Credit Building. Here's how they work, and you can do both of them at the same time if you like.
Cover
Cover is essentially overdraft protection to cover in case of emergencies. For $5 a month, KOHO will cover you for up to $50. As part of this, you'll get access to a financial coach.
You can cancel Cover at any time.
EQ Bank Card details
And now a closer look at the EQ Bank Card.
For earning rewards, EQ Bank keeps it simple – 0.5% cash back on all purchases.
As for the interest rate, you earn 3.3% on your balance, If you set up a direct deposit to your account, it gets increased to 3%.
And like some of the KOHO cards above, this card charges no foreign exchange fees of any kind.
And all this comes with no annual or monthly fees.
Which do you prefer – KOHO or EQ Bank?
Do you use a prepaid credit card?
Which do you think is the best prepaid credit card in Canada?
Are you thinking about getting a KOHO card? How about an EQ Bank card?
Tell us all about it in the comments!
FAQ
Is KOHO a prepaid card?
Yes, KOHO offers 3 prepaid Mastercards, including the KOHO Extra Mastercard. They all offer cash back on purchases and the ability to earn interest on your balance.
Where is KOHO accepted?
KOHO prepaid Mastercards are accepted anywhere Mastercard is accepted, including everyday shopping, making online purchases, and making hotel and flight bookings. You can earn up to 2% cash back on your spending – sometimes more with select retailers.
What is the best prepaid card with no fees?
The best no fee prepaid card in Canada is the EQ Bank Card. You'll earn 0.5% cash back everywhere, pay no foreign exchange fees, and earn up to 3% interest on your balance.
How much does a prepaid card cost?
The EQ Bank Card has no annual fee. KOHO has 3 other levels of their prepaid card that come with varying monthly fees.
Do prepaid cards build your credit?
Unfortunately, prepaid cards do not help build your credit because the issuers aren't actually giving you any credit. If you need to rebuild your credit score, we recommend taking a look at secured credit cards – these are also easy to get, and are a quick way to get your credit back in order.
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