How to Buy a Guaranteed Investment Certificate, GIC, at Oaken Financial

Well it’s December already so it’s time to buy another GIC for our emergency fund. We know it’s very unlikely that we would need our entire fund at the same time so we are investing 80% of it such that part of it matures each month. If, for example, we lost our jobs, we would be able to access some of our emergency fund each month as that month’s GIC matures. In the meantime, the money is earning a slightly higher rate than it would in a daily interest savings account at Tangerine, PC Financial or Oaken Financial. Because I just want to buy a regular GIC, not one in a registered account like a RRSP or TFSA, and because I already have a savings account at Oaken Financial, it’s very easy for me to buy another Guaranteed Investment Certificate.

Buying a GIC at Oaken Financial If You Have a Savings Account with Them

Sign in to your Oaken Financial online banking session.

Click on the Open New Account tab.

Rats.

You can’t actually buy the GIC online. You can phone them or you can mail in an application form.

Click on the link: Log out

Clear your cache and close your browser session.

Sigh. Time to pick up the phone.

How Easy Was It to Purchase a GIC from Oaken By Phoning?

Because we already have a savings account at Oaken and because the funds were already in the account, it was extremely easy to purchase the GIC by phoning.

The phone was answered in less than one minute.

The security questions were easy to handle.

Within another minute, two at the most, the 1-year non-redeemable GIC was purchased and all was done. No one tried to sell me anything or up-sell me to a longer term etc.

Do remember to tell them:
If you want the principal and interest paid out into your savings account at maturity or re-invested.

They asked, which was great, but it’s a good idea to make sure of that detail with any financial institution. (I hate it when GICs auto-renew!)

The representative told me that the GIC purchase confirmation notice will be mailed to me for our records.

UPDATE: On the morning of the following day, the GIC is now listed on my Home page.

Do I Have to Wait for my Funds to Come Off “Hold” Before I Buy a GIC?

No.

Once you’ve deposited funds into your account you can buy a GIC even if the funds are still on hold. (Which makes sense because they can always ‘take back’ the GIC if your funds do not clear your other bank properly: they are just switching the ‘on hold’ status from the bank account to the GIC.)

How Long Do Funds Stay on Hold at Oaken Financial?

According to their website, funds from

  • A cheque will be kept on hold for up to 5 business days.
  • An electronic fund transfer will be kept on hold for up to 3 business days.

My first funds were deposited by cheque on November 24, 2014.

My funds came off hold on December 5, 2014.

That’s actually 8 or 9 business days depending how you count them but this was the first thing I did when I was opening my account so it may have been slower.

My funds came out of my “big bank” account on November 26, 2014, by the way.

I’ll test the hold time on an ETF soon and try to update this with the results.
So far:
Friday December 5: Requested transfer in.
December 6 and 7: Money not in yet and no listing in “Pending” section of Transfers.
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Do you have any of your emergency fund in GICs? Is it easy to buy them or do you have to sit through a long sales pitch first? Please share your experiences with a comment.

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

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.

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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.