If you want a prepaid card, KOHO is one of your best options. These cards are excellent alternatives to credit cards, if avoiding interest charges is one of your goals.

KOHO offers a few different levels of their prepaid Mastercard, one of those is the KOHO Essential Mastercard. Here's what it has to offer.

How the KOHO prepaid Mastercard works

KOHO is a unique prepaid card. It's not only a prepaid card for spending, but also functions as a basic bank account. You can get payroll deposits set up and send money to others, and even earn interest if set up properly.

Loading your card/account is also simple – you can simply send an Interac e-Transfer to add funds to your balance.

The KOHO Prepaid Mastercard is offered in a few different levels. And as a bonus, you can switch between these levels when you want, as you have the option to pay for a full year in advance or simply go month to month.

Earning cash back with the KOHO Essential Mastercard

The KOHO Essential Mastercard earns members cash back on all purchases.

Here's what you'll earn:

• 1% cash back on groceries, restaurants, and transportation

It's not the best rewards you'll see, with an average return of only 0.5%. But, compared to what other prepaid cards are offering (which usually isn't much), at least it's something.

As to when you get your rewards? You won't be waiting long – they'll appear on your card as a balance credit within a few days after your purchase.

Benefits to the KOHO Essential Mastercard

What are some benefits to having the KOHO Essential Mastercard? Here are 4 things to like about it.

1. Earn interest on your prepaid balance

Want to earn interest on your prepaid balance? You can do that with a KOHO prepaid card.

With the KOHO Essential Mastercard, they're serious with the interest. You'll earn 2% on every dollar of your prepaid balance. That's better than what many banks will offer you with a savings account – and unlike a savings account, it's easy to spend your money.

It makes for a very unique spend/save account.

2. Improve your credit with Credit Building

One thing prepaid cards won't do is improve your credit score. Since you're spending your own money and not using credit, these products do not appear on your credit file.

But KOHO has an extra add-on to help. With their Credit Building add-on, you can improve your credit score.

Simply opt in to Credit Building and make sure there's always $7 in your account. Over the next 6 months, KOHO will take the $7 from your account and report to one bureau that you're making payments on time. KOHO will also give you access to your credit score so you can see the improvement for yourself.

Or if you prefer, you can pay the full $42 upfront. Either way, it's a cheap and easy way to improve your score.

3. Lower foreign exchange fee

For purchases that aren't made in Canadian dollars, most credit and prepaid cards charge a 2.5% fee for making the conversion.

With the KOHO Essential Mastercard, you get a break with this fee, as it only charges 1.5%.

4. Send money abroad with KOHO International Money Transfer

You can send money to people in over 190 countries right from your KOHO prepaid balance. There are no hidden fees and your recipient will typically receive the money in about 2 days. During our research, we found the typical fee to be about $4 for every $1,000 sent (which varies by currency).

2 downsides to the KOHO Essential Mastercard

Here are a couple of things you'll want to consider.

1. Poor rewards on purchases

The rewards that are given out on purchases are poor when compared to credit cards.

Our top no annual fee credit cards provide a return better than 1% on everything you spend, but here it's a paltry 0.5%.

If rewards are your top priority, you may want to look elsewhere.

2. Relatively high annual fee

There is the annual fee of $48 (or $4 per month) to consider.

In the world of prepaid cards, you're getting quite a lot from your card. But when compared to typical credit cards, you're not.

Compared to a normal credit card, you're getting fewer rewards, and no insurance or perks beyond the savings account rate, which you could get elsewhere.

You'll have to decide if the annual fee is worth paying or not.

With that said, it can be waived if you have a direct deposit setup or deposit $1,000 per month into your KOHO account.

Comparison to other KOHO tiers

KOHO offers several different tiers of their KOHO card – there's also the KOHO Everything Mastercard and the KOHO Extra Mastercard you can look at.

Here's what each of them offers.

There's a range of options to choose from. You can go with the lower fee option with fewer rewards, or get the premium version that offers plenty more rewards and charges no foreign exchange fees.

And, since you have the option to pay for KOHO monthly, if you decide a tier isn't worth it, it's easy to switch to another one.

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These are our thoughts on the KOHO Essential Mastercard.

Do you have this KOHO tier, or have you had it in the past? Leave a user review so others can see your real world experience with it.

FAQ

What does the KOHO Essential Mastercard offer for rewards?

The KOHO Essential Mastercard offers cash back on all purchases at these rates:

• 1% cash back on groceries, restaurants, and transportation

Your cash back gets added to your account a few days after your purchase.

What special features does the KOHO Essential Mastercard come with?

The KOHO Essential Mastercard comes with these special features:

• ability to earn up to 4.5% interest on your prepaid balance,
• improve your credit score with Credit Building, and
• charges a lower foreign exchange fee of 1.5%.

What are the income requirements and annual fee of the KOHO Essential Mastercard?

The KOHO Essential Mastercard has no income requirements and an annual fee of $48 that can be charged out as $4.