Tag Archives: savings

Can I Cash My Guaranteed Investment Certificate, GIC, Whenever I Want?

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I noticed on a chat board recently that some people do not understand how GICs work. They wanted to know if they could cash their GIC at any time to pay a bill, buy a car, or re-invest somewhere else at a better rate. In short, they wanted to cash their GIC before it matured.

How Do GICs Work? What Is Agreed Between the Issuer and the Buyer?

True Guaranteed Investment Certificates are not bank accounts or cashable term deposits. The issuer is selling the buyer a guaranteed return of their money plus the agreed on interest at the maturity date.

For example, a bank might sell a client a $2000 GIC with an interest rate of 2.3% per year that matures in 2 years. That 2.3% interest rate is higher than what the buyer could earn by putting the money in a bank account or a cashable term deposit at that specific time.
These standard, regular or true GICs cannot be cashed before they mature. You’re agreeing to lock in the money for the term to maturity.

What if Interest Rates Change After Buying a GIC?

If interest rates drift lower, the GIC buyer has guaranteed a good interest rate for two years. If interest rates rise, however, the buyer has locked in their money for the term to maturity at what may now be a lower interest rate. In the first case, it’s great! In the second case, it’s tough.

Standard GICs Cannot be Cashed without the Consent of the Issuer

A regular GIC is a fixed term contract. It cannot be cashed. You can’t get your money out before the maturity date, even if the interest rates have changed, or you have lost your job, or you want to get married.

The President’s Choice Financial “Must Have” GIC is an example of this. It clearly states that the GIC is “non-redeemable and must be held till maturity.” (http://www.banking.pcfinancial.ca/a/products/gic.page?region=ON&language=en&signinop=OB)

You Don’t Have to Buy a Standard GIC

If you aren’t sure whether you will need the money early, consider alternative types of investments. ING Direct GICs are all Cashable GICs. If you need to cash them before maturity, you will get back all of your principal and you may get a small “early redemption interest” payment as well depending on how quickly you cash it after buying it.
(http://www.ingdirect.ca/en/save-invest/gic/index.html)

Most banks offer some type of GIC that can be cashed. These GICs might not offer the length of time you want to invest for, or may only offer a much lower rate than a regular GIC, or they might limit when you can cash them early, or they might charge a fee for cashing early. You really have to read the details for each product you are interested in.

You Can Cash a GIC Early if the Issuer Agrees

The exception is you can cash a standard GIC early *IF* the issuer agrees.

For example, when we bought our first house, our RRSP investments were in GICs. Some of them were in the middle of the term and not ready to cash. Fortunately, we were getting our mortgage from the same bank that held our RRSP GICs. They readily agreed to let us cash the GICs early, without a penalty, so we could withdraw the money under the Home Buyer’s Plan and use it for a down payment.

Paying a Penalty to Cash a GIC Before It Matures

Some issuers will allow you to cash out a GIC early for a penalty.

  • “Extraordinarily nice” institutions might allow you to get your principal back and some of the interest. ING Direct offers this type of GIC.
  • “Nice” institutions might give you back your initial cash but not give you any interest. This is not uncommon in the case of a severe unexpected financial problem such as a death.
  • “Regular” institutions will not pay you any interest and will penalize you part of your original investment. So if you paid $1000 for your GIC they may only give you less than $1000 back.

Re-Selling a GIC Before It Matures

In theory, what the financial institution does when it cashes a GIC early is it looks for someone to buy it. Usually, they will have to sell the GIC at a discount to get someone to buy it. So if it was a $1000 GIC paying 2% interest at the end of a 1 year term (and therefore worth $1020 when in matures) they may have to sell it for $900 to find someone who will buy it.

Only GICs which are transferrable and assignable can be re-sold. Most standard, regular, true GICs aren’t.

In general, you can’t re-sell a GIC yourself. The issuer would have to agree to the sale and most won’t.

What Can You Do If You Need Cash and Your GIC Is Locked Up?

You might be able to ask a friend or relative to loan you the money with a written agreement that on the day the GIC matures you will collect the principal and interest and pay them back. Even if they are good friends, you should give them a promissory note in writing, preferably witnessed by a non-friend. That would mean they could easily take you to court and win if you didn’t pay them back. But since you’re going to pay them back, that would be ok, right?

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Have you ever needed to cash a standard GIC? Were you able to do so? Please share your experiences with a comment.

How to Set Up Automatic Transfers to an ING Direct Account

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Many people find the faster they move their pay out of sight the less of it they spend. You can automatically transfer money every day, week, or month to an Tangerine [formerly called ING Direct]  bank account from another institution to help you save. You can also transfer money within your Tangerine accounts. For example you can transfer from a chequing account to a savings account or to a TFSA or RSP account. It’s extremely easy and quick to set up automatic transfers with Tangerine. They call it their Automatic Savings Program although you don’t have to be saving to use the transfer process.

And you can cancel your automatic transfers at almost any time. (You can’t send a cancel order on the same day as the transfer is supposed to occur. You could try to phone Tangerine though and see if there’s still time to stop it.) It’s also a quick online process to cancel contributions.

How to Set Up a Regular Automatic Account Transfer for a Tangerine ING Direct Account

Log in to your Tangerine account online.

  1. From the list on the left hand side, click on Start an ASP.
  2. In the Amount ($) field, type the number of dollars you want to transfer each time to your account.
  3. From the Frequency: drop-down list, select how often you want to make an automatic contribution. The choices include
    • Daily
    • Weekly
    • Bi-weekly
    • Monthly

    Bi-weekly means once every two weeks. It does not mean twice a week.

  4. From the From: drop-down list, select the account from which you want to take the money.
    For example, if you want to transfer $45 per week from your TD chequing account, look on the list for it. The TD account number will be listed but not the current balance because Tangerine does not have access to your account information at another bank.
  5. From the To: drop-down list, select the account to which you want to make the deposit.
    For example, if you want to deposit the money in your Savings Account, look on the list for it. The Tangerine account number will be listed and the current balance will be shown.
  6. In the Start Date: field, type the date you want to start the contributions.
    It appears that the earliest date you can select is 2 business days after today’s date.
  7. In the End Date (optional): field, type the date you want to stop the contributions.
    If you want to contribute indefinitely, just leave that field blank.
    For information on how to stop automatic contributions, please see How to Cancel a Tangerine Automatic Savings Program (ASP).
  8. Click on the Next button.
    You may receive an error message if the amount per contribution you selected is too low. For example, I tried to set an automatic contribution of $5 (just to test the procedure) and was warned that the minimum for the types of accounts I had selected was $10.
  9. If all goes well, you will receive a review screen. It will list where the money will come from, how much, and where it will be deposited. It includes the start date and the frequency.
    If all of the details are correct, click on the Confirm button.
    To cancel the transaction, click on the Cancel button.
    To correct your selections, click on the Change button.

If you’re finished using Tangerine click on the Log Me Out button. For increased security, clear your browser cache and close your browser session.

To Check Your Regular Contribution Instructions for a Tangerine ING Account

  1. Log in to your Tangerine account.
  2. To check your settings at any time, click on the View My Accounts tab.
  3. Click on the account that will receive the transfer.
    (Or if you are automatically sending money away from a Tangerine account, click on the account that will be making the transfer.)
  4. From the list on the left side of the screen, click on View Pending Transactions.
    The effective date of the next transfer will be shown, along with a transaction description, type, frequency and amount.
  5. When you’re finished click on the Log Me Out button. For increased security, clear your browser cache and close your browser session.

You’re done!

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Do you find it convenient to set up automated transfers to or from your Tangerine accounts? Did you do it just to get the sign-up bonus or was there another benefit for you? Please share your experiences with a comment.
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