How to Buy GICs in Canada
We’ve explained what GICs are, listed 5 reasons you should invest in them, and even shared one personal finance blogger’s expert opinion on why she loves GICs. One thing we haven’t covered yet, though, is how to buy GICs.
The process varies slightly, depending on which distribution channel you go through, so we decided to lay it all out in one blog post to make sure things are crystal clear. Here’s everything you need to know about buying GICs in Canada.
GIC Issuers in Canada
The first thing you should know is that there are GIC issuers and there are GIC distribution channels. GIC issuers are the financial institutions that actually issue the GICs themselves.
GIC issuers include:
- Banks: The most commonly recognized GIC issuers in Canada are the banks, including: Bank of Montreal, CIBC, Royal Bank, Scotiabank and TD Bank. There are also over 70 other CDIC member firms that offer GICs, most of which are smaller banks, such as Equitable Bank or Pacific & Western Bank of Canada. Note: Smaller banks tend to offer more competitive rates.
- Trust Companies: Trust companies operate similarly to banks and are federally incorporated, but are governed according to the Trust & Loans Act vs. the Bank Act. Trust companies can also include subsidiaries of the banks, including CIBC Trust Corporation and the Royal Trust Corporation of Canada, or insurance companies such as Sun Life Financial.
- Credit Unions and Caisses Populaires: Many Canadians do their daily banking with credit unions, known in Quebec as caisses populaires. Credit unions are member-owned financial institutions that operate as co-operatives, and there are hundreds of them across Canada to choose from.
Note: GICs issued by banks and trust companies are covered by CDIC insurance, up to $100,000. GICs issued by credit unions or caisses populaires are, instead, insured by the deposit insurance provider for the province in which they are purchased. You can see a detailed list of what’s covered by credit unions in each province on the GIC insurance page in our education centre.
How to Buy GICs in Canada
Aside from just the GIC issuers, themselves, there are a number of different distribution channels through which you can buy a GIC. Here’s a step-by-step process for how to buy GICs through each distribution channel.
How to Buy GICs Through Independent Deposit Brokers
Similar to the way mortgage brokers work with multiple lenders, independent deposit brokers work with a variety of financial institutions (banks, trust companies, credit unions). Because of the volume of business they do, independent deposit brokers are able to offer slightly better interest rates than many financial institutions. Before buying a GIC through a broker, do your homework to make sure they are a) a member of the Registered Deposit Brokers Association of Canada, and b) that the GIC product you want to buy will be covered by GIC insurance.
When you’re ready to buy a GIC through an independent deposit broker, the first thing you should do is setup an appointment, so you can ask them about the GIC products they offer and which financial institutions they work with. From there, transactions can be completed with nothing more than verbal instructions from you + a cheque made out to the GIC issuer (not the broker), so your broker can purchase the GIC for you. That’s it!
How to Buy GICs Through Online Discount Brokerages
If you’re a savvy DIY investor, you can opt to buy your GICs through an online discount brokerage. These brokerages operate fully online, so you don’t have to make any appointments or even talk to someone, in order to buy a GIC. By using an online discount brokerage, you manage all trades (purchases of GICs) yourself at a reduced commission compared to what you would be charged by a full-service broker.
The process to buy a GIC through an online discount brokerage depends on which one you decide to use. If you used Questrade, you would first have to open an account with them and then add Questrade as a bill payee in your online banking. Other online discount brokerages may require you to send in a cheque, so they can manually link your bank account to your new brokerage account. Either way, once you have an account that’s linked to your bank account, you can login to your brokerage account, search GIC products by rate, term and type, choose the one you like and buy it.
How to Buy GICs Through Banks and Trust Companies
Before you can buy a GIC directly from a bank or trust company, you first need to open a bank account with them and deposit some money into it (which will be used to purchase the GIC). When the money is ready, you can then buy a GIC in-person, online or over the phone.
To buy a GIC in-person, you’ll have to visit a branch, tell them which GIC you want and sign a few forms. Your money will then be withdrawn from your account and deposited into a GIC. To buy a GIC online, first gather your account number and branch number (can be found on a cheque) and your social insurance number. Once you have that, login to your account and buy the GIC. You’ll receive proof of the purchase, showing the value and type of GIC you bought, in the mail a few days later. And to buy a GIC over the phone, you’ll simply need to answer a few security questions to confirm your identity, before the operator can process your transaction.
How to Buy GICs Through Credit Unions and Caisses Populaires
Finally, the process to buy a GIC through a credit union or caisses populaires is similar to banks and trust companies, but the one key difference is you need to become a member first. Since credit unions operate as co-operatives, anyone who wants to bank with them has to pay a one-time membership fee (usually $5-25) to join.
Once you’re a member and have opened a bank account, you can buy GICs at any branch or online, the same way you could through a bank or trust company.
Find the Best GIC Rates on Ratehub.ca
As you can see, there are a number of different routes you could take, to buy a GIC in Canada. Whichever option you choose, you’ll always find the best GIC rates when you shop around. We compare all GIC issuers and compile the best rates in one place, so you don’t have to.
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