What is a Hybrid Bank Account in Canada?

A hybrid bank account combines the characteristics of both a chequing account and a savings account.

You can use a hybrid account to perform everyday financial transactions, such as bill payments, money transfers, and purchases.

At the same time, you’ll earn interest on the balance you hold in the account.

What’s the Difference Between a Hybrid Account and a Regular Bank Account?

A hybrid bank account is unique because it shares attributes of a chequing account and a savings account.

It can conveniently serve your everyday banking needs: purchasing fuel for your vehicle, transferring money to a friend or accepting payment from your employer.

While you can easily accomplish these tasks with a regular chequing account, you’d generally have to pay a monthly fee, whereas a hybrid account usually charges no fee.

In addition, certain hybrid accounts come with a rewards program, such as the ability to earn cash back or store discounts.

A hybrid account usually offers special interest rates, often higher than just a savings account.

While there are savings accounts that pay exceptional rates on your balance, the vast majority of these are promotional offers that expire within a few months.

After that, the account’s default interest rate takes over, which is considerably lower.

Another notable aspect differentiating hybrid accounts from their standard counterparts is that most are available through fintech companies and smaller banks that operate primarily online.

Large and well-established banks have yet to embrace hybrid accounts in the same way.

How Does a Hybrid Account Work?

A hybrid account offers you the flexibility and convenience to conduct your day-to-day banking needs while simultaneously earning interest on your balance.

Here are some of the financial transactions you can perform using a hybrid account:

  • Bill payments
  • Point-of-sale purchases
  • Email money transfers
  • Direct deposits
  • Mobile cheque deposits
  • ATM withdrawals

With few exceptions, you can perform unlimited transactions at no cost.

Your financial institution may also issue you with a prepaid credit card that’s linked to your hybrid account, which you can load with money to make purchases.

These cards work like a typical debit card, and transactions funnel through Visa or Mastercard.

As a result, you can use them at any merchant location that accepts these card networks.

Much like a credit card, some hybrid accounts offer a rewards program.

You can collect cash back, points, or store discounts with each purchase.

While hybrid accounts strive to provide the best that chequing and savings accounts have to offer, they may still impose certain restrictions on your banking activities.

For example, some brands don’t allow you to make bill payments or accept direct deposits.

As with a standard savings account, the interest that accumulates in your hybrid account is taxable.

Key Components of a Hybrid Bank Account

Below is a table that outlines the primary aspects of a hybrid account:

Minimum Deposit Typically, no minimum deposit is required to open a hybrid account.
Service Fees A key selling point of many hybrid accounts is that they don’t charge monthly maintenance fees or transaction fees. This can vary widely. You may incur transaction fees ranging from $1-$1.50 if you don’t maintain a minimum balance.
Interest Rate Hybrid accounts pay an interest rate between 0.05% and 1.25%.
Debit Transactions Usually, unlimited debit transactions are permitted, subject to daily caps.
Email Money Transfers Usually, unlimited money transfers are permitted, subject to daily, weekly, and monthly caps
Minimum Balance There’s usually no minimum balance requirement for a hybrid account.
Prepaid Credit Card A physical prepaid card complements a hybrid account, enabling you to make in-store purchases and withdraw cash from an ATM.

Advantages of Hybrid Accounts

A hybrid account provides numerous benefits:

  • Little or no fees
  • High-interest rate
  • Unlimited financial transactions
  • Access to a prepaid credit card for in-person purchases
  • Rewards program
  • Innovative and user-friendly apps
  • No adverse effect on your credit score

A hybrid account is a perfect option for someone looking for a flexible and convenient way to perform a wide range of banking transactions and earn a respectable rate of return on their balance.

Budget-conscious individuals will appreciate the ability to conduct unlimited money transfers, purchases, withdrawals, bill payments, and more while paying little or no fees for doing so.

A rewards program that offers the chance to collect cashback, points, or store discounts will appeal to consumers looking to get more out of their hard earned money.

Disadvantages of Hybrid Accounts

Despite their surging popularity, hybrid accounts do have some drawbacks:

  • Certain functions, such as bill payments, may be unavailable
  • Perks are not exceptional when compared to credit cards
  • Low interest when compared to other investment products
  • Few institutions provide them
  • Won’t help build credit

Currently, hybrid accounts are the domain of smaller financial institutions and fintech firms, some of whom operate entirety online.

If the thought of going fully digital increases anxiety and you prefer the familiarity of a physical branch, a hybrid account may not be suitable for you.

Furthermore, suppose you already conduct all your financial matters – mortgage, line of credit, investment accounts – through a single bank.

You may wish to maintain chequing and savings accounts there as well for the sake of convenience.

Hybrid accounts may lack specific features and perks you seek, such as a higher rate of return or a lucrative rewards program.

In that case, you’ll likely find other financial tools and products to be superior, such as a credit card and guaranteed investment certificate (GIC).

Don’t Forget!

To earn the advertised interest rate on some hybrid accounts, you may need to maintain a certain minimum balance.

What are the best hybrid accounts in Canada?

Hybrid bank accounts are becoming increasingly attractive for consumers, which is presently a rarity in Canada.

Here are some of the most notable ones:

1. Koho

Koho is a fintech company founded in 2014 in Vancouver, British Columbia.

Though not a bank, the firm partnered with the People’s Trust and Visa to launch a prepaid credit card and mobile spending app, which function as a hybrid bank account.

Koho charges zero monthly fees for a basic account and provides 0.5% cash back on every purchase made.

You earn an interest rate of 1.2% on your money, no matter the balance you keep in your account.

There are no fees to pay for Interac e-Transfers and debit transactions, and you’re not subject to a monthly cap on either.

The Koho app has a feature called Roundup, which automatically rounds up your purchases to the nearest $1, $5, and $10, depositing the difference as savings.

2. Manulife Bank of Canada Advantage Account

Manulife Bank of Canada has the distinction of being Canada’s first bank to operate entirely online.

The bank offers a hybrid bank account called the Advantage Account.

There’s no minimum balance requirement to open an account and no monthly fee.

You have the privilege of unlimited free transactions, including bill payments, online transfers, debit purchases, direct deposits, and withdrawals.

However, to realize these benefits, you’ll always have to keep a minimum of $1,000 in your account.

Otherwise, you’ll be subject to a fee of $1 per electronic transaction and $1.50 per withdrawal.

You’re daily limit for debit transactions is $3,000.

For Interac e-Transfers, the limits are as follows:

  • $3,000 per day
  • $10,000 per week
  • $20,000 per month

The account generates an interest rate of 0.15%, which is on the low-end of comparable hybrid accounts.

3. EQ Bank Savings Plus Account

Equitable Bank was founded in 1970 and is currently Canada’s eighth-largest bank.

On January 14, 2016, it debuted its digital banking operation called EQ Bank.

The bank’s most notable product is the Savings Plus Account, which functions as a hybrid account.

There are no monthly fees to contend with, and it offers unlimited free-e-Transfers, bill payments and electronic funds transfers.

You can also set up direct deposits.

There’s no minimum balance requirement, but the maximum balance is capped at $200,000.

Unlike other hybrid accounts, the Savings Plus Account doesn’t have a prepaid credit card.

Currently, you can earn a competitive rate of 1.25% on your balance.

How to Open a Hybrid Account

Opening a hybrid bank account in Canada is simple.

There are no onerous eligibility criteria to meet and little paperwork to fill out – you can be ready to go in just a few minutes.

You can visit a physical branch (if one exists) to sign-up or complete the application process entirety online.

In general, you’ll need to supply the following:

  • One or two pieces of government-issued identification
  • Personal details, like your name, address, phone number, and social insurance number
Koho hybrid account

Frequently Asked Questions

  • Should I open a hybrid bank account?
  • What is the meaning of a hybrid account?
Mark Gregorski

Mark is passionate about educating people on how the financial markets work and providing tips to help them better manage their money. Mark holds a bachelor’s degree in finance from the Northern Alberta Institute of Technology and has more than a decade of experience as an accountant.

Outside of writing and finance, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.