All You Need To Know About Opening A GIC Account In Canada

GIC, which is short for Guaranteed Investment Certificate, is a widely used investment option in Canada. This is suitable for those who prefer a low-risk, secure investment and a medium for saving their money. GIC provides a guaranteed return over the fixed duration of the contract. This blog covers these topics: opening a GIC account in Canada, how GIC works in detail, the advantages of GICs, the different types of GICs, and some considerations for choosing the right GIC for you. 

What is a GIC?

GIC is a Canadian investment instrument that purely offers a guaranteed rate of return over a fixed period. The duration may vary from a few months to several years. These are considered risk-free or low-risk investments that guarantee the principal amount plus the interest rate. These types of investments attract conservative investors and international students, who often like to diversify and create their portfolios with a stable and safe income.

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How does the GIC operate?

In simple terms, international students who wish to pursue their education in Canada need to transfer a certain amount from their Canadian account to a GIC account. GIC acts as a savings account for students and enables them to accrue interest on the principal sum monthly, which helps them meet their basic survival needs. This also aligns with Canadian government regulations, as international students participate in the Study Direct Stream (SDS) program.

Is it obligatory to have a GIC account in Canada?

GIC accounts in Canada are mandatory for international students who are applying under the SDS program. Students from selected countries, like India, should hold a GIC account to prove their financial ability to manage their living and education expenses. While this is not required universally, GICs can be requested for some specific reasons or by trust companies in very particular situations.

Also read: Top Immigration Consultants For Canada In Ludhiana

Advantages of investing in GICs

• Safety & Security: Provides guarantee on the principal amount invested
• Guaranteed Returns: It ensures that investors/students will get fixed interest rates over an investment period.
• Flexible Terms: Investors/students have the flexibility to opt for a duration ranging from 30 days to 5 years or more.
• Diverse Options: Provides a wide array of GICs, i.e., redeemable GICs, non-redeemable GICs, and market-linked GICs, which cater to various investment preferences and goals.

Types of GICs:

1. Redeemable GICs:

Redeemable GICs/Cashable GICs refer to an investment opportunity that covers short-term and are flexible with earning lower interest rates. International students/investors can claim their cash without any penalty before maturity, even at any point during the GICs’ term, as a plus for the investment type. The majority of the cashable GICs have a lock-in period of 30-90 days. Besides being a redeemable investment, the investor continues to earn interest on the invested principal while holding the certificates.

2. Non-Redeemable GICs:

A Non-Reclaimable GIC is a type of investment whereby an investor/international student invests the money for a definite period and then receives back the money with a higher interest rate. On the contrary, unlike other GICs, the principal is locked for a fixed term and can’t withdraw the funds until the term ends. After the maturity of the plan, the investors/international students can either withdraw their capital and interest or re-invest. Non-redeemable GICs come with options from very short periods, say 30 days, to long terms, such as 10 years, with the longer terms offering better rates, even up to 6%. The obligation of the contract involves penalties, so they are ideal for long-term investment.

3. Market-linked GICs

Market-linked GICs offer a mixture of safety and a higher rate of return by linking the investment to the stock market index. Interest rates fluctuate according to stock market performance, whereas the principal amount invested will be guaranteed. Meaning the investor/international student can potentially earn higher returns if the performance of the stock market is high and vice versa if the stock market fails to perform.

Also read: Pilot Training In Canada For International Students

Process of opening a GIC account in Canada:

• Research: Research various financial institutions, banks, credit unions, and online banks to compare GIC rates, terms, and conditions.
• Identification: Keep your identification documents ready, such as your passport and other related documents from the university.
• Application: Fill in all the required details in the form (online application/offline application) based on the mode selected by the financial institution.
• Funding: Students need to fund their GIC account based on minimum investment criteria once the application is approved.

Points to consider while choosing the right GIC:

• Financial Goal: Decide upon a short-term or long-term investment to finalize the term length of the GIC.
• Risk Tolerance: Analyze your risk-bearing ability and consider the best option that suits your requirements.
  • High Risk – Market-linked GIC
  • Low Risk – Redeemable/Non-Redeemable GIC
• Rate of Return: Compare various financial institutions and find the best rates and terms.

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Conclusion

The Canadian investment structure offers a GIC account which is safe and reliable. International students receive returns in installments every month.  Investing in various GIC options in the portfolio can help secure students’ future amidst changing economic conditions, whether seeking immediate stability or long-term growth. But it’s equally important to asses risks and understand the terms in detail before choosing the investment strategy best suited for your financial goals.