Do you want a checking account with a rate that is as competitive as a high-interest savings account in Canada? Well, the good news is that these accounts exist, but they are rare. Most hybrid bank accounts are excellent financial products that allow you to earn higher interest on your checking account deposit.
Also known as a high-interest checking account, a hybrid bank count is the combination of a checking account and a high-interest savings account. It comes with a higher interest rate and the flexibility of your checking account.
Just like a checking account, a hybrid bank account can be used to make frequent transactions such as bill payments, point of sale purchases, and regular money transfers.
Based on Lend for Allregular chequing accounts offer little to no interest on your deposits. On the other hand, most high-interest savings accounts often offer interest rates at 1.05% or higher. A hybrid account combines the benefits of both a chequing account and high-interest savings account into a single, convenient package.
Should you use hybrid bank accounts?
If you want to simplify your banking products by taking a somewhat minimalist approach to banking, you can benefit from hybrid bank accounts. Financially conscious people can also enjoy the benefits of these accounts by keeping their financial or banking products under a single Hood. This can alleviate confusion surrounding various banking services and probably make it easier to monitor their transactions. Also, it can minimise costs, particularly if your bank account doesn’t charge monthly fees.
One of the top benefits of hybrid bank accounts is that keeping your finances in such an account ensures your money is deposited into an account earning interest. Most chequing accounts don’t offer interest that means the money in that account loses its value over time. Though hybrid bank accounts usually benefit from higher deposits, you can still enjoy the benefits of combining high-interest savings accounts and a checking account.
Best hybrid bank accounts
As mentioned earlier, most Canadian financial institutions rarely offer hybrid accounts. Here are the best hybrid account options for people who want to reap the benefits of such accounts.
1. EQ Bank Savings Plus
EQ Bank was the Personal Finance Awards winner in 2020. This financial institution offers savings plus account at no cost to the customers. Also, EQ Bank provides unlimited, free e-transfers, which means that this account is suitable for use with a free chequing account. One of the benefits of having EQ bank savings plus account is that it allows you to link other accounts for seamless money transfers. You can also set up direct deposits to your EQ Bank savings account.
Note that EQ Bank offers a 2.45% interest rate on savings accounts deposits. Just like high-interest accounts, this account can keep your money parked while accruing a significant amount of interest. Besides, EQ Bank offers free e-transfers, which means using them with your no-fee chequing account will save you a lot of money.
Lastly, EQ Bank now facilitates affordable global money transfers via TransferWise. It’s important to mention that EQ Bank isn’t available in Quebec.
2. Simplii Financial Chequing Account (No-Fee)
Simplii Financial provides nearly every financial product that all popular banks offer at no monthly fee. Some of these financial products include a no-fee chequing account and a high-interest savings account. The financial institution’s no-fee chequing account allows you (the cardholder) to transfer savings at your convenience using the institution’s mobile app. This makes such an account an excellent option for people in need of a no-cost chequing account and high-interest account.
Simplii Financial’s clients can also enjoy unlimited point of sale transactions, e-transfers, and cash withdrawals, particularly from CIBC ATMs. Keep in mind that this financial institution is not available to Quebec residents.
3. Manulife Advantage Account
Manulife One Bank is among the well-known Canadian independent banks. The bank offers Advantage Account, a hybrid bank account that offers a 1.50% interest rate. Their clients can use ATMs and the EXCHANGE network without having to pay extra costs.
Having a minimum balance of $1000 in your Advantage Accounts allows you to enjoy unlimited e-transfers, monthly transactions, self-serve transactions, and unlimited chequing transactions. In case your balance is below $1000, you will be charged $1 per e-transfer, $1 per transaction, and $1.50 for each ATM transaction.
Note that Manulife Advantage Account is available to all Canadians.
4. HOHO Save Bank Account
Setting up a KOHO account is easy and free. The good news is that you can choose to open a KOHO Save Account. This account offers you a 1.2 per cent interest rate on your deposits and provides a long-term interest rate, with no promotional period ending in 12 months. Besides, KOHO Save Account allows you to earn 0.5 percent cash back on the money you spend. That means your money will be earning interest and additional money every time you pay using your card.
Hybrid Accounts FAQs
Are hybrid bank accounts better than high-interest savings accounts?
Well, the response to this question depends on your financial situation. Hybrid bank accounts are more beneficial to people who spend a lot of money because they have the chance to make interest on cash that would otherwise be idle in their account. If you want to keep your money in a savings account, it is better to open a high-interest savings account.
Is the money earned (interest) on hybrid bank accounts taxable?
Yes. Just like other high-interest savings bank accounts, you should pay tax on the amount of interest you make with your hybrid bank account. Remember, you only need to pay interest on the interest amount only. You don’t have to pay tax on the initial deposit amount.
Is money in a hybrid bank account protected by the CDIC?
Your money is safe because the initial deposit amount and interest made are fully protected by the CDIC.
Summary
Hybrid bank accounts are an excellent option for people seeking flexibility in banking activities. They are suitable for people who often keep a lot of money in their checking accounts because hybrid accounts give them a chance to earn interest on their initial deposits.