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Frequently Asked Questions

Guaranteed Investment Certificates or GICs are exactly that, an investment of capital where your principal and interest is guaranteed. Simple, safe and secure. However, there are questions about GICs that we frequently hear.

We have compiled a list of the most frequently asked questions, the process of purchasing GICs through a Deposit Broker, along with other pertinent information about GIC interest rates, plans and requirements of the industry. Check the short menus first to drill down to your specific answer or scroll the page for the entire FAQ list.

If you don’t find what you are looking for, please give us a call at 877-551-7283 or 250-592-7707.

General FAQs

What is a deposit broker?

A deposit broker helps clients (both individual and corporate) select guaranteed investment products (GICs) and strive to offer the best available rates from various Canadian financial institutions (Credit Unions, Banks and Trust Companies).

GIC products include Non-Registered and Registered (RSP, RIF and TFSA) plans and are available in Short Term GICs (30-365 Days), Long Term GICs (1-5 years) and Cashable GICs with several interest payment options available.

Clients benefit from the higher rates, expertise and choice offered through the deposit brokers at no cost. Clients do not pay for the service they receive because deposit brokers are paid by the financial institutions the GICs are placed.

Financial institutions benefit for the low-cost way to distribute deposits (GICs), attain deposit targets and increase market share, low-cost because they can reduce staff and other operational costs by using a deposit broker.

Click here for the video: What is a Deposit Broker?

Why use a Deposit Broker?

Personal Service, Best GIC Rates and No Fees!

Personal Service

You benefit from dealing with a GIC specialist who keeps your conservative needs at the forefront, always.

Best Rates

GICdirect has access to higher GIC interest rates from a network of Banks, Trust Companies and Credit Unions. We shop the market for the highest available rates so you don’t have to!

No Fees

Our services are free of charge.

Why purchase a GIC?

Often overlooked or under-appreciated, Guaranteed Investment Certificates (GICs) offer unique benefits and play an important role in many investment plans. On their own, they provide security and predictable income. As part of a diversified portfolio they also deliver stability and growth, especially when interest is compounded within tax-sheltered plans such as TFSAs, RRSPs, RRIFs and LIFs.

Security

GICs come with a variety of terms and features, including cashable options. No matter what your selection, all GICs have one advantage in common: guaranteed return of principal. At the end of the term, you will receive the full amount you invested. As many investment gurus have noted, GICs may not make you wealthy but they ensure you hold on to your hard-earned money.

In addition to principal guarantees, as a GIC holder, you are protected against the insolvency of the issuer by Canada Deposit Insurance Corporation or a provincial deposit insurance organization, within their respective limits.

Predictable income

With most kinds of GICs, a fixed rate of return is also guaranteed so you can count on regular income regardless of what the markets are doing. This makes it easier to plan for cash needs during the year or when your investment matures. Working with a deposit broker, you can arrange to receive income as monthly or annual payments, or have your interest compounded to the end of the term.

Stability and growth

When combined in a portfolio containing other types of investments, there is no disputing the contribution made by GICs through market cycles. Thanks to their guaranteed principal and returns, you can be sure that part of your portfolio is always producing – even in market downturns. By balancing the more volatile investments, Guaranteed Investment Certificates also help stabilize the value of your portfolio from year to year. Consider too that GICs help fill the fixed-income component of your portfolio with no MERs and no commissions.

Click here for the video: Why Purchase a GIC?

How is my GIC Protected?

All Canadian Financial Institutions (Banks, Trust Companies and Credit Unions) are members of Deposit Insurance Corporations and coverage amounts depend on the Financial Institution. Banks and Trust Companies (including Mortgage Corporations) are members of the Canadian Deposit Insurance Corporation (CDIC). Credit Unions are covered by provincial insurance corporations.

Click here for the video: How is my GIC protected?

Bank and Trust Companies (including Mortgage Corporations) are members of the Canada Deposit Insurance Corporation. Please visit www.cdic.ca for detailed coverage information and a list of member institutions.

Insurance Coverage for Credit Unions (by Province)

British Columbia

Credit Union Deposit Insurance Corporation (CUDIC) is a government corporation, established in 1958 that provides deposit insurance for members’ deposits. The Financial Institutions Commissions (FICOM), an agency of the Government of BC, is responsible for administering CUDIC and for regulating financial institutions operating in the province. For more information, visit www.fic.gov.bc.ca.

All money on deposit and money invested in non-equity shares with a BC credit union is 100% guaranteed, including foreign currencies and accrued interest, regardless of the length of the term to maturity.

Alberta

The Credit Union Deposit Guarantee Corporation (CUDGC) monitors and regulates the performance of credit unions in Alberta and the compliance of Alberta credit unions with the Credit Union Act. The primary role of the Corporation is to guarantee deposit protection to deposit holders with credit unions in Alberta. For more information, visit www.cudgc.ab.ca.

Each Alberta credit union is required to build and maintain capital to a level outlined in the Credit Union Act and Regulations. A credit union’s capital is comprised of retained earnings, and common shares and investment shares (if any) owned by its members.

The Credit Union Deposit Guarantee Corporation provides a 100% guarantee of all deposits with Alberta credit unions. This protection includes accrued interest to the date of payout. The Government of Alberta ensures that the Credit Union Deposit Guarantee Corporation’s obligation to depositors will be carried out.

Manitoba

The Deposit Guarantee Corporation of Manitoba (DGCM) commenced operations in 1965. Its mission is to guarantee deposits and maintain confidence in the Manitoba credit union system, by focusing on sound business practices, governance, performance and risk management. For more information, visit www.depositguarantee.mb.ca.

All deposit amounts are fully guaranteed and include accrued interest to the date of payout. Deposit amounts include chequing and savings accounts, RRSP deposits, RRIF deposits, foreign currency deposits and term deposits, including those with terms exceeding five years. There is no legislated requirement for the Manitoba government to provide financial support to credit unions.

Ontario

The Deposit Insurance Corporation of Ontario (DICO) is a Provincial Agency providing deposit insurance protection for the members of Ontario Credit Unions and Caisses populaires. For more information, visit www.dico.com.

DICO’s insured institutions pay premiums to DICO to cover the cost of insuring your deposits. In the event that a credit union is unable to repay all of its deposits, DICO pays these up to the maximum prescribed limit of $100,000 for deposits held in each of the separate categories of DICO deposit insurance coverage.

Deposit insurance covers eligible deposits up to the prescribed statutory limit of $100,000. DICO automatically insures savings and chequing accounts, term deposits (GICs), money orders, certified cheques and registered accounts.

Saskatchewan

Credit Union Deposit Guarantee Corporation (CUDGC) guarantees the full repayment of deposits held in Saskatchewan credit unions. The Corporation is the primary regulator for Saskatchewan credit unions. For more information, visit www.cudgc.sk.ca.

Deposits held in Saskatchewan credit unions are fully guaranteed. There is no limit to the size of deposit covered by the guarantee – whether $100 or $1,000,000 or more. All deposits are fully guaranteed.

The Corporation’s system of deposit protection, including preventive approaches, strong levels of credit union capital and a strong guarantee fund, ensures even the largest deposits are fully guaranteed.

What is a GIC Laddering Strategy?

A Guaranteed Investment Certificate or a GIC ladder or laddering strategy is a long term investment strategy and can enhance returns in the GIC component of your portfolio, achieving greater growth while reducing risk.

You start by dividing the amount you have to invest into five equal parts and invest five GICs with terms of one, two, three, four and five years. Each year, when a GIC comes due, you reinvest in a five-year GIC. In four years you will have all your money in five-year terms, which generally have higher interest rates than GICs with shorter terms.

In addition to providing greater potential growth with overall higher interest rates, a GIC ladder offers liquidity – ensuring you have access to 20% of your money each year for planned or unplanned expenses. By diversifying maturity dates you also reduce timing risk – the risk of having to reinvest all your money in a year of unfavourable GIC interest rates.

Click here for the video: GIC Laddering Strategy

Rates

How does GICdirect get higher GIC rates for their Clients?

GICdirect has access to higher Guaranteed Investment Certificate (GIC) rates from our extensive network of Financial Institutions (Banks, Trust Companies and Credit Unions) across Canada. It is less expensive for Financial Institutions to issue GICs and provide higher GIC rates through deposit brokers like GICdirect because they do not incur the overhead costs that they do in their retail locations, therefore can pass on a higher GIC rate to you as a client.

Additionally, GICdirect provides you access to the best GIC rates across Canada, including access to institutions that may not be available to you in your home province.

How do I find out about Interest rate changes?

Guaranteed Investment Certificate rates or GIC rates are determined by each institution depending on their need and demand of funds or as they adjust to interest rate changes in the market. Most of our 40 institutions change their interest rates either daily or weekly.

GICdirect.com updates all GIC rates online twice a day at 8am and 4pm (PST) by province in the Rates and Locations pages.

GICdirect sends out Rate Blasts when interest rates peak or higher than average GIC rates become available, sign up to receive our Newsletter to be added to the list!

Have rates ever been this low?

Due to the enduring global economic crisis, interest rates and Guaranteed Investment Certificate (GIC) rates continue at generational lows. The average return for any investor (high risk takers or conservative) over the past decade has not met expectations and “zero is the new hero,” where clients are highly focused on capital preservation at the expense of potential growth.” (Mackenzie Professional).

However through a Deposit Broker, conservative investors can find GIC rates that beat retail bank GIC rates and even keep up with inflation.

The charts below provides the low and high bank rates over the last 10 years for a 1 year, 2 year and 3 year GIC and benchmark returns for MSCI World Index and the S&P/TSX.

What is an Escalator Rate?

An escalator Guaranteed Investment Certificate or escalator GIC rate is a 5 year GIC that pays increasingly higher (escalating) rates of interest in each year of the term. They are also marketed as Rate Riser GIC’s or Step-Rate GIC’s.

Usually a higher rate is paid in the 5th year with lower rates at the beginning and during the term. The average rate to maturity may not be as attractive as a straight forward five year GIC. The real or effective rate may be less than a 4yr or 5yr fixed rate GIC.

For example, an escalator GIC advertised as 6.00% pays 1.10% in the 1st year, 1.75% in the 2nd year, 2.75% in the 3rd year, 3.50% in the 4th year and 6.00% in the 5th year. One tends to focus on the 6.00%. In this example, the average annual rate of the GIC is actually only 3.02% over the 5-year period.

Always compare a straight term GIC and an escalator GIC to see which is better for you and your investment objectives.

Deposit Insurance

How is my GIC Protected?

All Canadian Financial Institutions (Banks, Trust Companies and Credit Unions) are members of Deposit Insurance Corporations and coverage amounts depend on the Financial Institution. Banks and Trust Companies (including Mortgage Corporations) are members of the Canadian Deposit Insurance Corporation (CDIC). Credit Unions are covered by provincial insurance corporations.

Click here for the video: How is my GIC protected?

Are my US Dollar GICs insured by the CDIC?

U.S. dollar and other foreign currency Guaranteed Investment Certificate (GIC) deposits are not eligible under the Canadian Deposit Insurance Corporation (CDIC).

The Credit Union Deposit Insurance Corporation(CUDIC) of British Columbia covers U.S. dollar deposits.

Does Credit Union insurance cover me if I live out of province?

Yes, your Guaranteed Investment Certificate (GIC) principal and interest is covered, no matter where you reside. For estate planning, it is always recommended to invest all non-registered GICs in joint name with rights of survivorship so that you don’t have to file probate out of province.

How does CDIC insure 5yr GICs that mature on a non-business day?

Where a five-year GIC’s maturity falls on a non-business day, the GIC will be eligible for deposit insurance if the agreement between the depositor and the member institution provides that the GIC is for a five-year term, or if the GIC was advertised or otherwise offered by the member as having a five-year term.

The GIC will not be eligible for deposit insurance if, on the other hand, the agreement between the depositor and the member institution provided for a GIC with a term exceeding five years, or if the GIC was advertised or otherwise offered by the member institution as having a term of more than five years.

GIC Process

Why use a Deposit Broker?

Personal Service, Best GIC Rates and No Fees!

Personal Service

You benefit from dealing with a GIC specialist who keeps your conservative needs at the forefront, always.

Best Rates

GICdirect has access to higher GIC interest rates from a network of Banks, Trust Companies and Credit Unions. We shop the market for the highest available rates so you don’t have to!

No Fees

Our services are free of charge.

Why purchase a GIC?

Often overlooked or under-appreciated, Guaranteed Investment Certificates (GICs) offer unique benefits and play an important role in many investment plans. On their own, they provide security and predictable income. As part of a diversified portfolio they also deliver stability and growth, especially when interest is compounded within tax-sheltered plans such as TFSAs, RRSPs, RRIFs and LIFs.

Security

GICs come with a variety of terms and features, including cashable options. No matter what your selection, all GICs have one advantage in common: guaranteed return of principal. At the end of the term, you will receive the full amount you invested. As many investment gurus have noted, GICs may not make you wealthy but they ensure you hold on to your hard-earned money.

In addition to principal guarantees, as a GIC holder, you are protected against the insolvency of the issuer by Canada Deposit Insurance Corporation or a provincial deposit insurance organization, within their respective limits.

Predictable income

With most kinds of GICs, a fixed rate of return is also guaranteed so you can count on regular income regardless of what the markets are doing. This makes it easier to plan for cash needs during the year or when your investment matures. Working with a deposit broker, you can arrange to receive income as monthly or annual payments, or have your interest compounded to the end of the term.

Stability and growth

When combined in a portfolio containing other types of investments, there is no disputing the contribution made by GICs through market cycles. Thanks to their guaranteed principal and returns, you can be sure that part of your portfolio is always producing – even in market downturns. By balancing the more volatile investments, Guaranteed Investment Certificates also help stabilize the value of your portfolio from year to year. Consider too that GICs help fill the fixed-income component of your portfolio with no MERs and no commissions.

 

Click here for the video: Why Purchase a GIC?

What is the difference between a registered and a non-registered investment?

RRSPs are registered with the federal government for tax purposes. New RRSP contributions can be claimed against your income during a calendar year. Individuals contribute to registered plans during their peak earning years (limits depending on income), while in the highest tax bracket. The benefit of an RRSP is to defer tax on income earned to a later date when one is presumably in a lower tax bracket.

Non-registered investments are not registered with the federal government, they do not have limits and earned income must be included as taxable income each year.

RRIFs are the conversion of RRSPs to a payment plan (income fund) in the calendar year the contributor turns 71 years of age. The purpose of a RRIF is to pay out the contributions and interest on a regular schedule to the plan holder by the time they turn 90 years of age.

TFSAs are also considered registered however the contributor does not receive a contribution benefit but the interest earned is tax free. For more information, please see “What is a Tax Free Savings Account?”

Click here for the video: Is an RRSP for me?

What ID is valid for investing with GICdirect.com?

To purchase a Guaranteed Investment Certificate (GIC) through a deposit broker, you will need two pieces of primary ID, such as:

  • Driver’s license
  • Current Canadian passport
  • Certificate of Canadian Citizenship
  • Certificate of Naturalization

If two pieces of primary ID is not available, one of the following with a primary ID will be accepted:

  • Permanent resident card
  • Birth certificate issued in Canada
  • Old Age Security Card
  • Certificate of Indian Status
  • Provincial Health Card (cards issued in MB, ON, PEI, or the NWT are not accepted)

Why do I need two pieces of ID and my Social Insurance Number (SIN) to buy a GIC?

GICdirect.com must comply, as all deposit brokers, with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) regulations, which state that each client file must include the Registered Deposit Brokers Association (RDBA) Client Information & Consent Form with two valid pieces of ID, parallel to each investment.

Why is the Client Information and Consent Form required to buy a GIC?

The completed and up to date Client Information and Consent Form satisfies the requirements within the compliance procedures for all Canadian financial entities (Schedule I, II, III Banks, Credit Unions, Caisse Populaires, Trust and Loan Companies) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and it’s supporting Regulations.

Canada is considered a leading country in anti-money laundering legislation and regulation and complies with recognized global standards.

What is a GIC Laddering Strategy?

A Guaranteed Investment Certificate or a GIC ladder or laddering strategy is a long term investment strategy and can enhance returns in the GIC component of your portfolio, achieving greater growth while reducing risk.

You start by dividing the amount you have to invest into five equal parts and invest five GICs with terms of one, two, three, four and five years. Each year, when a GIC comes due, you reinvest in a five-year GIC. In four years you will have all your money in five-year terms, which generally have higher interest rates than GICs with shorter terms.

In addition to providing greater potential growth with overall higher interest rates, a GIC ladder offers liquidity – ensuring you have access to 20% of your money each year for planned or unplanned expenses. By diversifying maturity dates you also reduce timing risk – the risk of having to reinvest all your money in a year of unfavourable GIC interest rates.

Click here for the video: GIC Laddering Strategy

Corporate GICs

Can a not-for-profit organization have a GIC?

A Not-for-Profit Organization can access higher Guaranteed Investment Certificate (GIC) rates and can purchase a GIC through a deposit broker provided they have documentation proving the organization’s existence and current status, as well as documentation on signing authorities.

Laws & Regulations

What is Money Laundering?

Money laundering is the method by which “dirty money” (proceeds of crime or money received from criminal activity) is processed through legitimate businesses and converted into “clean money.” Once cleaned, the money cannot be easily traced to the person originating the transaction or to the criminal origin of the funds.

What legislation and/or regulations are behind investing in a GIC?

The government of Canada established (and amends as required) the legislation to combat money laundering under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The Act includes enhanced reporting, registration, record keeping, compliance, penalties and risk assessment requirements.

The Financial Transactions and Reports Analysis Centre (FINTRAC) is Canada’s financial intelligence unit, a specialized agency created to collect, analyze and disclose financial information and intelligence on suspected money laundering and terrorist financing activities.

The Office of the Superintendent of Financial Institutions (OSFI) is the primary regulator of federally chartered financial institutions and administered pension plans. OSFI’s mandate is to safeguard policy holders, depositors, and pension plan members from undue loss by ensuring public confidence in the financial services industry.

Along with FINTRAC and OSFI the Federal, Provincial and Municipal Police forces and the Canada Border Service Agency are all involved in combating money laundering and terrorist financing.

TFSAs

What is a Tax Free Savings Account (TFSA)?

A Tax Free Savings Account or TFSA is a flexible, registered savings vehicle allowing for tax-free investment income earnings. A Guaranteed Investment Certificate (GIC) can be purchased in a TFSA and income earned, or withdrawals made to and from it will not affect any federal income tested benefits and credits; i.e. Child Tax Benefit, Guaranteed Income Supplement, Old Age Security benefits and Good & Services Tax Credit.

Canadians aged 18 and older can contribute to a TFSA, investors do not need to have earned income to contribute but will need a valid Canadian social insurance number (SIN). Unused contribution room can be carried forward without limit (within the cumulative total).

Contribution Room

For info or how much you can contribute, click here


Withdrawals
  • Tax-free withdrawals can be made at any time and for any purpose.
  • Amounts withdrawn may be re-invested in the following year.
Taxation
  • Interest, dividends, and capital gains earned within a TFSA will not be taxed.
  • Contributions are not tax-deductible.
  • Interest incurred on loans for TFSA contributions are not tax-deductible.
Eligible Investments

Most investments that can currently be held in an RRSP will be eligible for holdings in a TFSA. This includes mutual funds, Guaranteed Investment Certificates (GICs), publicly-traded securities, government and corporate bonds

Some TFSA Strategies to Consider

Each investor has their own unique investment goals and a TFSA can be used to complement their existing financial planning strategy. A TFSA can be used to finance short-term and long-term goals such as a new car, a vacation or enhancing retirement or education savings.

Click here for the video: What is a TFSA?

Non Residents

I am a Canadian citizen living out of the country, can I invest with GICdirect.com?

GICdirect.com can place a Guaranteed Investment Certificate (GIC) for you if you are living outside of Canada but you must have an active chequing account with a Canadian Financial Institution, as well as your Canadian social insurance number (SIN).

Please call us to discuss your specific situation and options.

I am a US citizen, can I invest with GICdirect.com?

Yes, a US citizen can access higher Guaranteed Investment Certificate (GIC) rates through a deposit broker like GICdirect.com. To purchase a Guaranteed Investment Certificate (GIC), a US citizen will require an active chequing account with a Canadian Financial Institution and a TIN (Individual Tax Identification Number) for tax processing issued by the IRS. Some institutions require a Canadian Social Insurance Number (SIN).

Please contact us at info@gicdirect.com or call 1-877-551-7283 to discuss your specific situation, options and GIC rates.