Let us first understand what GIC Account stands for GIC ( Guaranteed Investment Certificate) Meaning of GIC Account is GIC is an investment account created by Banks in which students will get guaranteed interest rate for a fixed time period. To know more about how to open a GIC (Guaranteed Investment Certificate) Account, Please read the complete article.
Next, let us try to know what exactly is this certificate A GIC (Guaranteed Investment Certificate) is a safe and secure investment with very low risk. You do not have to worry about losing any of your money because it is guaranteed.
A GIC works just like a savings account in which you deposit money and earn interest on that money Simple. Now let us understand: How do GICs work? The difference between GIC and a Savings Bank
A GIC works just like a savings account in which you deposit money and earn interest on that deposited money. Now let us understand how do GICs work? We have to leave certain money in a GIC account for a specified period of time say one year or so, the concept of GIC account is to meet the expenditure of your one-year expenses. For CANADA you have to initially open the account with CAD 10200 for one year. You can take out CAD 2000 to meet out the first-year expenses & subsequently you can take out roughly CAD 700 every month. You get the interest on the leftover money.
If you take out the money early, you have to pay a penalty, which depends on the type of GIC you have& of course interest too. When you invest in a GIC, you agree to lend the Bank or Financial Institution the money for a specified number of months or for up to 5 years. In return, your money will earn interest. The longer the term, the more interest you will earn. At the end of the specified term, you will get the entire amount you deposited along with the interest.
A GIC account is that you have to leave the money in a GIC account for a specified period of time. If you take out the money early, you have to pay a penalty, which depends on the type of GIC you have. When you invest in a GIC, you agree to lend the Bank or Financial Institution the money for a specified number Of months or for up to 5 years.
GIC investment In return your money will earn interest. The longer the term, the more interest you will earn. At the end of the specified term, you will get the entire amount you deposited along with the interest.
Some basic things you should know about what is a GIC Account
1. One needs to invest at least $500 in this account.
2. Generally, there are no fees to be paid in the case of GICs.
3. Most GICs pay a fixed rate of interest for a selected term; say 6 months, 1 year, 2 years or up to 5 years and the term ends on the date of maturity.
4. The longer the term, the higher the interest rate one earns.
GIC interest rates
5. There are some GICs that offer variable interest rates.
best GIC rates
6. The interest in your GIC will be paid monthly, once a year or on the maturity date
7. In case there is any need for you to get your money back before the maturity date, you will have to pay a penalty depending on the type of term decided.
8. The funds kept for a non-redeemable term are generally locked until maturity unless there are some qualifying circumstances
9. A few GICs — called Cashable or Redeemable GICs — do not charge any penalty if you need to get your money out early, but the interest paid is at a lower rate GIC interest rates
10. Please note that your money remains protected through the CIDC or Canada Deposit Insurance Corporation – but only for terms of 5 years or less and that too only in Canadian dollars.
11. One can also hold the GICs in registered investment accounts like RRSPs, RRIFs, and TFSAs. RRSP stands for–Registered Retirement Savings Plan RRIF stands for–Registered Retirement Income Fund TFSA stands for–Tax-Free Savings Account
12. In case one holds the GICs outside of RRSPs, RRIFs, or TFSA – one will be taxed on the interest one earns.
Next, let us understand 4 important considerations for our GIC Account:
1. Can you afford to have your money locked in for a term? In case there is any chance that you will need your money earlier, consider how early you will need it. If you plan for a major purchase in the near future, say 6 months it is just right. Or maybe you can wait for 1, 2 or say up to 5 years. Therefore, choose a term that fits your investment goals, but will not leave you to cash strapped. You will also want to avoid paying any penalty fees if possible.
2. Do you wish for a fixed interest rate or a variable interest rate? Please note that GICs pay a fixed interest rate, which means you will know how much interest you will get at the end of the term. GICs with a variable interest does not give a guaranteed rate of interest at the end of the term since they are based on various market conditions. Sometimes you may earn more, but it may so happen that you may earn nothing at all.
3. Do you need regular income from your GICs? In case you wish to invest in GICs in order to get a regular income and also get access to your money on an on-going basis, then:
- Go for a GIC that makes regular interest payments.
- Enquire about a GIC that pays interest each month automatically, rather than at the end of the term.
- Go for buying GICs which mature at different times. For example: If you have $5,000 to invest, put $1,000 into a One -year GIC, $1,000 into a Two-year GIC, and so on. In this way, you will get $1,000 of principal maturing every year for 5 years. In case you don’t need the money, you can re-invest it into another GIC, in whatever term you decide.
4. A common question is: are there any risks to buying GICS? Please understand that even though GICs are a low-risk investment, there are some important factors that could adversely affect your money-making potential
:
- GICs may not keep pace with the rate of inflation. Normally, GICs have a relatively low rate of return, which means they may not keep up with inflation.
- GICs with variable interest rates offer no guarantee whatsoever of getting returns beyond your principal.
- GICs linked with the stock market pay a variable interest rate that is based on how the market behaves or performs. Please note that the risk is greater in such situations and you will not know how much interest you will receive at the end of your term.
- While your initial investment GIC
- the investment amount is guaranteed, there is no guarantee at all to the effect that your GIC will make you additional money.
Tax will be deducted from your interest earnings – unless your GICs are in form of RRSPs/ RIFFs/ TFSAs. e.
Kindly note that your GIC account is not protected or guaranteed if:
- They are U.S.A GICs.
- GICs were purchased anywhere else other than from a major Canadian Bank/ Credit Union.
- The selected term is greater than 5 years. We will now move to the second part of the Topic ie How to Open a GIC account
For this, you can visit the websites of a few banks and find out the modalities. For Example, The Scotia bank Student GIC Program involves 4 key steps:
a. SUBMIT YOUR APPLICATION.
b. TRANSFER FUNDS TO YOUR SCOTIABANK INVESTMENT ACCOUNT.
c. APPLY FOR YOUR STUDY PERMIT.
d. OPEN A BANK ACCOUNT IN CANADA WHEN YOU ARRIVE.
One student asked the following question:
How long does it take to open a GIC (Guaranteed Investment Certificate) account?
The answer is as under:
GIC confirmation will be sent usually within 5 Business Days from receipt of the application.
Once you send funds, it usually takes 3 business days for the GIC to be funded.
The confirmation will be sent usually within 2 Business Days after your GIC
account is funded.
Contact us to know more about What is a GIC Account and How to open a GIC (Guaranteed Investment Certificate) Account:
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