Category Archives: Money Tips

Shopping For the Best GIC Rate, Term and Flexibility: A Comparison of PC Financial, Tangerine, DUCA, Implicity, Oaken and Others

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We are fortunate, and nervous, enough to have an emergency fund saved up. With interest rates on savings accounts well below 2%, we decided that we should put some of this money into GICs with staggered maturity dates: after all, it’s unlikely we would need the entire emergency fund on day 1 of a layoff. But when I looked at the GIC rates at Tangerine and PCF I wasn’t satisfied. So I started comparing GIC rates, terms and flexibility from a variety of sources including Oaken Financial (Home Trust), Equitable Bank, Canadian Tire, and credit unions including DUCA, Meridian and ComTech.

What Features Do I Need In a GIC?

I started by listing what I’m looking for in a Guaranteed Investment Certificate, GIC.

  • a term of 12 to 18 months maximum (for this purpose)
  • an acceptable interest rate (There are no ‘good’ rates right now.)
  • CDIC insurance (I had a relative who lost money in the 1980s when a trust company went bankrupt and took her GIC with it.)
  • whether it can be cashed early or not, and on what terms
  • how convenient it is to invest the money
  • how easy it is to set instructions that the certificate must be paid out at maturity not rolled over

Comparing Interest Rates for Savings Accounts and GICs at Online Banks, Credit Unions and Trust Companies

GIC rates change frequently, even daily if companies are competing to increase their cash reserves or are testing how low they can go.

The following rates were listed on various online sources on Saturday November 15, 2014. You’ll have to check again yourself to see if there have been changes, unfortunately, as I don’t have time to keep this table up to date. Also, some products are only available in certain provinces.

Company HISA rate % 1 year GIC rate % 18 month GIC rate % minimum amount insured by terms extra info
Buduchnist Credit Union 1.35 1.45 n/a $1000 DICO Redeemable Term Deposits are available at a lower rate. Members can buy GICs online. http://www.buduchnist.com/ways_to_bank_en_285cms.htm
Canadian Tire 1.5 1.05 n/a $500 CDIC Account holders can buy GICs online; Can be redeemed early and it will pay interest though at a lower rate. Bonus 0.25% interest paid for amounts over $20 000. https://www.myctfs.com/Products/GICs/LearnMore/
ComTech Credit Union 1.2 2.1 2.25 $1 000 DICO non redeemable http://www.comtechcu.com/comtech/term-deposits.php
http://www.comtechcu.com/comtech/rates.php
DUCA 3.25% limited time offer rate (last posted rate 1.45%) 1.25 n/a $500 DICO redeemable term deposits are available http://duca.com/myMoney/Listing/Investments/deposit_products
https://duca.com/Rates
Equitable Bank 1.5 1.75 n/a $1 000 CDIC cashable available but most are not redeemable http://www.equitablebank.ca/brokerage/en/ds-product-overview.html
http://www.equitablebank.ca/brokerage/en/ds-rates.html
Implicity Financial 1.9 2.25 n/a $1 000 DGCM not redeemable https://www.implicity.ca/Products/GICs/
https://www.implicity.ca/Rates/
Meridian Credit Union 1.75 1.5 n/a $500 DICO non-redeemable http://www.meridiancu.ca/rates/gics/Pages/default.aspx
Oaken (Home Trust) 1.75 2.15 (special till Dec 19 2014: 2.40%) 2.25 (special till Dec 19 2014: 2.5%) $1 000 CDIC Cashable available at a lower interest rate (if not redeemed early) http://www.oaken.com/wps/portal/oaken/rates
President’s Choice Financial 1.3 1.392 n/a $100 CDIC not redeemable http://www.banking.pcfinancial.ca/mkt/bankaccounts/interestplussavingsaccount-en.html
http://www.banking.pcfinancial.ca/mkt/investments/guaranteedinvestmentcertificate-en.html?region=ON&language=en&signinop=OB
Tangerine 1.3 1.35 1.55 $10 CDIC currently redeemable but that may change http://www.tangerine.ca/en/rates/index.html
http://www.tangerine.ca/en/legal/account-terms/index.html#gic

Are the Guaranteed Investment Certificates, GICs, Insured by CDIC?

The Canadian Deposit Insurance Corporation may insure all of your deposits at a financial institution up to $100 000 per person. If covered, GICs are only insured if they are for a term of 5 years or shorter, and if they are issued in Canadian dollars. (That’s why you hear so many people quoting the 5-year interest rate.)

Not all financial institutions belong to the CDIC. You have to check the details before you sign anything.

Some Credit Unions have provincial credit union deposit insurance programs. Check the details of these very carefully before investing. Personally, I just stick to CDIC-insured deposits since there are so many readily available and I feel comfortable with the size of the CDI Corporation.

Can the GIC Be Cashed Early?

Most GICs cannot be cashed before they mature.

A surprising number of people don’t get that. They don’t understand that the reason the rate that is offered is better than a savings account is because you are agreeing to leave the money alone for a long period of time.

Some places do offer “cashable” GICs. The rate is lower than for a non-redeemable GIC. And they often pay no or very little interest on the money for the time it was in the GIC if it is cashed early.

For instance, I have a GIC issued 5 years ago by Tangerine (then ING Direct.) It will only pay 0.5% for the time the money was in that GIC if I cash it early. Talk about losing money to the rate of inflation! I’d be getting back something that would buy substantially less than when I put it in.

I don’t expect to need to cash these emergency fund GICs early, but I will see what is offered if anything.

Why Investing Convenience Matters

I don’t want to spend time walking to a bank, credit union or trust company every time I want to buy a new GIC. I want to be able to do the work online, preferably in the evening when I have time and a secure computer.

I wouldn’t mind investing by mail but it seems a bit slow so unless it will make a significant difference to the interest rate, I won’t use that method.

Why I Insist GICs Pay Out at Maturity and Are NOT Automatically Re-invested

I had a bad problem with this at BMO in the old days. For some reason, within one of my RRSPs, it was almost impossible to set instructions to have the GIC mature out to cash. Instead, the default for any GIC purchased was that it would be re-invested at maturity.
Even though I signed forms and checked boxes when buying the certificates that said I wanted them to mature at cash, they didn’t.

And every time I tried to put that instruction on the file, I would be told I could not submit the paperwork until two weeks before maturity. (No one ever volunteered to keep the paperwork in their file and submit it for me on time.) Often “two weeks before maturity” was not a convenient time for me to attend a half-hour meeting (by the time I walked there, waited and then was served) so it would get missed. Then I would have to waste more than half an hour fighting to get the auto-renewal reversed.

It was important not to automatically re-invest because you could always get a better rate, often 0.5-0.75% higher! If you asked for it from an agent. The auto renewal rate was always poor.

Anyway, after all that stress, I decided I would never buy a GIC that doesn’t allow me to set the instructions for the money at maturity easily when I first buy the certificate. ING Direct, now Tangerine, fit my needs perfectly. It has a convenient online feature where you can change your instructions for the GIC at maturity with a click of the mouse. Unfortunately, in recent years Tangerine’s GIC rates have plummeted. They are still above those offered by most of the “Big Banks” but they are no longer near the best available.

What Did I Buy

Stay tuned for more updates as I pick a financial institution and try to buy a GIC from them.

Related Reading

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Do you have some of your emergency fund in a GIC? If so, where? Please share your experiences with a comment.

Simplifying and Improving Our RRSPs: a Review of the Progress Made Over 4 Years

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It’s amazing how much more time you have once your children are in school and the eldest is old enough to be left “home alone” even if only for a 5-minute bike ride to the mailbox. When we reached this milestone in parenthood, I finally had the time to start looking at where our money was and why and deciding what changes were needed. One of the first messes that needed to be cleaned up was our RRSPs: It’s taken 4 years to simplify and improve our RRSP holdings but things are progressing well.

What We Started With

Four years ago I wasn’t even sure

  • where our RRSP money was,
  • how much was in each place,
  • what the rate of return was on the money, and
  • whether we should be doing something differently with it.

I read a few books about RRSPs and one piece of advice struck home immediately.

Why You Should Always Designate a Beneficiary for Your RRSP

Four years ago, we already had our wills and the wills designated that my husband and I will inherit each other’s assets if one of us dies. What I didn’t know, though, was that if a RRSP has a designated beneficiary, the value of the RRSP is not included in the amount that the government uses to calculate the probate fee or, as Ontario now calls it, the Estate Administration Tax.

For example, say I had $100 000 in my RRSP and I died. If my RRSP did not have a beneficiary named, that $100 000 would be added to my other assets and that total amount would be taxed by the Ontario government as a condition of probating my estate. If my other assets were worth, say, $50 000, the government would charge an Estate Administration Tax of $1 750.

If I had designated my husband as the beneficiary of my RRSP, he would not have to include the $100 000 value of my RRSP in the amount used to calculate the estate administration tax. That means the tax would be calculated based on the other $50 000 in my estate. The total payable would be $250.

That’s right. He would not have to pay $1 500 in tax.

Just for having his name on a slip of paper filed at the bank!

So the first thing I did was get a Beneficiary form filled out and properly filed for each of our RRSPs.

Neither of us has died yet but it still feels like we’ve saved thousands of dollars.

Where Our RRSP Money Was

We had quite a collection of RRSP accounts 4 years ago.

I eventually determined we had

  • a RRSP invested in mutual funds and GICs at CIBC
  • another RRSP in a GIC at CIBC
  • a RRSP each holding Canada Premium Savings Bonds in the Canada Retirement Savings Plan
  • a RRSP each in GICs and cash at ING Direct (now Tangerine)
  • a spousal RRSP in GICs at ING Direct (now Tangerine)
  • a locked-in RRSP at BMO in GICs and high interest savings accounts
  • a RRSP at BMO in mutual funds and GICs
  • a RRSP at BMO in a high interest savings account

Argh! Can you see why I desperately needed to fix this up?

For anyone who is deadly curious, the mutual funds included

  • index funds mirroring the performance of the TSX and the NYSE (purchased before ETFs existed)
  • funds holding mortgages
  • funds holding bonds in Canada, the USA and internationally

Where Our RRSP Money Is

We are not finished consolidating our RRSP holdings yet. Unfortunately, you cannot simply transfer GICs from, say, CIBC to CIBC Investor’s Edge. Don’t ask me why. I’m pretty sure it has to do with making the bank more money at our expense, though.

Still, it’s looking a bit better:

  • a RRSP each at BMO InvestorLine
  • a LIRA at BMO InvestorLine
  • a RRSP at CIBC Investor’s Edge
  • a spousal RRSP at RBC Direct Investing
  • a GIC RRSP at CIBC that we will be able to transfer to Investor’s Edge in 2015 on maturity
  • a GIC RRSP at Tangerine that we will be able to transfer to BMO InvestorLine in 2015 on maturity

The CIBC Investor’s Edge RRSP could be consolidated with one of the BMO InvestorLine ones, but to avoid paying transfer fees it’s best to wait till the GICs at CIBC mature and the money can transfer fee-free up to the Investor’s Edge account. Then, if desired, the entire amount can transfer out to InvestorLine. Or, conversely, the InvestorLine account could transfer in to Investor’s Edge. That would bring us down from 10 accounts to 4.

The spousal RRSP is at RBC Direct Investing primarily so I could investigate their trading platform in more depth! It could be transferred out at any time but I’m happy to keep it there. As a spousal it cannot combine with any other RRSP so it really makes little difference which brokerage it is kept at. (All of our RRSPs qualify for the lowest trading commissions etc at their respective brokerages.)

The optimization of the holdings within the RRSPs continues. I’m sure it will be the subject of more articles in the future.

Related Reading

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Did you make the mistake of opening a new RRSP at a different bank each time you moved? Did you ever despair and refuse to read your RRSP mutual fund statements for over a year? Please share your RRSP escapades and foibles with a comment.