Right now, the interest rates offered for GICs are very low. I would not actually recommend buying a GIC at these rates unless it’s the only fixed income investment you can find that fits your portfolio. However, I am trying to review the products and services offered by PC Financial and Tangerine, so today I checked into how to buy a GIC.
Are Tangerine GICs Redeemable?
In the old days, when the company was ING Direct, you used to be able to cash their GICs. Technically, that meant they weren’t really conventional guaranteed investment certificates. In general, GICs cannot be cashed until they mature. ING Direct used to even pay you interest if you cashed your GICs before maturity: Admittedly they paid less interest than if you held them to maturity, but it was still some compensation for tying up your money.
Recently, however, ING Direct Canada was purchased by Scotiabank. And even more recently, this ability to cash GICs early and even receive a small amount of interest has vanished from their product descriptions.
*** However today (June 25, 2014) when I bought a GIC I discovered that the option still exists, at least for now! When I reached the “Here’s What’s Going to Happen” review screen, I noticed the details about what I was buying said “You may redeem this GIC before the end of the term, but if you do, you will not receive the posted rate of interest. Instead, a fixed annual Early Redemption Rate of 0.5% will apply.”
So apparently you may have to *almost* buy a GIC and check whether or not it is still cashable. They could change this offer at any time. You can’t tell till you have almost paid for the GIC.
How Much Do I Have to Invest In Each GIC at Tangerine? What’s the Minimum?
If you do need to buy GICs and if they are not cashable early or if they are cashable but you are not likely to need the entire amount at one time, it’s a good idea to buy several smaller GICs with different maturity dates.
For example, if you have $5000 to invest, you could buy a $500 GIC each month for 10 months. Then you will get access to $500 (plus interest) of your cash each month as they mature.
If you are buying GICs at a discount online brokerage, you may have to invest a minimum of $5000 to get one GIC. (RBC Direct Investing let’s you invest as little as $3500 for one GIC in a RRSP; BMO InvestorLine and CIBC Investor’s Edge require $5000 per GIC in a RRSP.)
How small an amount will Tangerine allow you to invest in a GIC?
Well, I tried buying a regular GIC with an amount of $1 and it was rejected. The error message says: “For this Account, transaction amounts need to be at least $10.”
That’s interesting. The interest rate for a 1.5 year GIC is posted as 1.55%. If I invest $10 I will earn 15.5 cents after 18 months. I wonder if they will round it up to 16 cents, or down to 15? I’ll have to check in 18 months.
What Types of GICs Can I Buy at Tangerine.ca?
Registered and Non-Registered GICs from Tangerine
There are several choices:
- GIC
- RSP GIC
- TF GIC Be careful! This is a TFSA GIC and counts as part of your TFSA!*
(Believe it or not, there is a person appealing for forgiveness from the CRA because he thought it was just “tax free” and not part of his TFSA, so he over-contributed to his TFSA and now faces a fine of $50 a month. Why it would be “tax free” if it wasn’t a TFSA is beyond me. But be informed: a TF GIC is a TFSA investment.) - RIF GIC
- US$ GIC
If you buy a RSP GIC
- and pay for it with money from your savings or chequing account you are making a new contribution to your RRSP.
- and pay for it with money from your RSP Savings account, you are not making a new contribution.
If you buy a TF GIC
- and pay for it with money from your savings or chequing account you are making a new contribution to your TFSA.
- and pay for it with money from your TFSA Savings account, you are not making a new contribution.
Check your RRSP and TFSA contribution room before making any new contributions to avoid penalties for over-contributing.
Terms to Maturity for GICs from Tangerine
There are also several choices for the length of the term to maturity.
Tangerine offers GICs with terms of
- 90 days
- 180 days
- 270 days
- 1 year
- 1.5 years
- 2 years
- 3 years
- 4 years
- 5 years
WATCH the interest rates before buying, though. Right now, the terms shorter than 1 year are paying less interest than keeping your money in their savings account!
Annual Pay or Compound Interest GICs from Tangerine
You can also select whether to receive your interest payment at the end of each year, for a multi-year GIC, or to leave it with the principal to earn compound interest until the end of the GIC’s term.
For example, if you buy a 5-year GIC, you can get paid your interest at the end of each of years 1, 2, 3, 4 and 5, or you can leave the interest in the GIC and receive all 5 years’ interest, plus the interest earned on the interest itself, at the end of the five years.
How to Invest in a GIC at Tangerine.ca
- Log in to your Tangerine account/s.
- From the Saving link on the navigation bar at the top of the screen, select Guaranteed Investments.
- For a regular GIC (not in your RRSP, TFSA, RRIF or in US$) beside the heading Tangerine Guaranteed Investment (GIC) click on the Learn More button. Read through the information about this product.
- If the information looks ok and you want to buy a GIC click on the Open an Account button.
To Buy a Regular Tangerine GIC
- In the Amount $ field, type how much you want to invest in this one certificate.
- If applicable, click to select USD or leave it to select Canadian dollars.
- If you have a purpose for the GIC such as saving for your child’s dental work, you can type in a reminder in the Nickname text box.
I typed: super low investment. - From the Account term drop-down list, select the length of time you want to invest the money.
For example, pick a 1.5 year term for a GIC that matures 1 year and 6 months from today. - From the Fund from this account drop-down list, select where to get the money to buy the GIC.
- If you want to delay the purchase, click on the Effective Date field and select which day you wish to buy the GIC.
- From the Maturity instructions drop-down list, select whether you want the money paid out to your bank account when the GIC matures or whether you want to have Tangerine immediately buy you a new GIC with the same term instead.
(Since you can’t cash most GICs, it’s probably better for most people to have the GIC pay out to your bank account in cash when it matures so that you can consider what you want to do next before you commit.) - From the Interest options drop-down list, for a GIC with a term of more than one year, you can choose whether Tangerine will pay you the interest for the previous year into your bank account; or whether it will keep it in the GIC so that you will earn interest on your interest in the following year/s.
NOTE: If the GIC is not in a RRSP, RRIF or TFSA you will have to pay income tax on the interest each year even if you don’t get paid the interest that year! - From the Selected Account for payout drop-down list, select where you want Tangerine to pay the interest and the principal when the GIC matures.
- If necessary, change the answer to Is this a joint Account? To Yes; otherwise leave it to the default setting of No.
- For legal reasons, confirm that you are the only person benefitting from this investment. (e.g. that you are not investing money for another company or person.)
- From the drop-down list, select why you are saving the money.
- Click on the links to read through the Terms and Conditions and the Privacy Code statements. The more important information is located under the Account Terms link at https://www.tangerine.ca/en/legal/account-terms/index.html If the information is acceptable, click on the Yes button to accept them.
- Click on the Next button.
If you put in an acceptable amount for the Amount, you will move on to the
You’re almost done… here’s what’s going to happen
review page.
- Read the details for what you’re planning to buy.
Wow. My investment will mature on Christmas Day in 2015. That’s sweet. Imagine getting 15 or even 16 cents for Christmas! - Everything looks good, so I will click on the Confirm button.
- Click on the Print button to print a copy of this transaction. This is important because if you want to cash your GIC early you may need to have the proof from this page that you are entitled to receive a low interest rate of 0.5% if you have kept the investment long enough.
- Once you’ve finished printing the receipt, click on the Continue Banking button.
- If you’re finished banking, click on the Log Me Out link.
- To increase security, clear your browser cache and close your browser session.
Related Reading
- Buying a GIC at President’s Choice Financial
- Buying a GIC at BMO InvestorLine
- Buying a GIC at RBC Direct Investing
- Buying a GIC at CIBC Investor’s Edge
Join In
Do you buy GICs to lock up your money so you don’t spend it recklessly? If you do, does a cashable GIC make sense? Please share your views with a comment.
Thank you for the insights. Any thoughts on their investment funds? I like the index funds as the management fees are lower; however, I question their rate of returns when they can only show historical information to 2011. I’m looking for long-term investment for retirement (20+ years) and so would be willing to risk it in an equity growth portfolio. Trying to find a 6-8% rate of return seems impossible when going through banks. Is this too good to be true?
I’m certainly not the right person to give investing advice to maximize your profits as my track record will show. (I’m very risk averse and hold huge amounts in fixed income and only a very small amount in stocks.) However, the Canadian Couch Potato is an investment-type who reviews financial products in detail.
He does say that the Tangerine funds can be used as a simple method to invest “couch potato” style. http://canadiancouchpotato.com/2013/09/12/the-one-fund-solution/ After a person has at least $50,000 invested for the longer term (10y+) he suggests it may be better to switch to individual ETFs using one of his Model Portfolios. But under $50k he thinks the fees are reasonable at Tangerine.
It’s very difficult to find historical values for many years for any fund or ETF. They have a habit of slightly (or even radically) changing their name and holdings every so often. But a fund, like Tangerine’s, that attempts to just mimic the entire stock market means you can get an idea of how it would have performed by looking at the history of the TSX or NYSE.
A balanced fund (60-70% equities, 40-30% bonds) historically has averaged 6-8% or higher, but of course that’s no guarantee of the future. And it’s important to be willing to NOT SELL equities or equity-funds if the market plummets. Equity returns often swing wildly from 20% up one year to 35% down another. They don’t usually move along at a steady 8%, that’s the average after smoothing out all of the highs and lows.
Good luck with your investing choices. They are tricky!