What is Guaranteed Investment Certificate (GIC) for Canada?

Heading to Canada for studies can be exciting but also a bit tricky, especially when you need to show you have enough money. That's where a GIC comes in handy, making things easier for getting your student visa. This blog helps you get all the info on GICs, from what they are, picking a bank, to managing your account, aiming to smooth out this part of your journey to Canada.

Latest Update: The minimum GIC amount for international students applying for a Canadian study visa in 2024 is CAD 20,635. This amount was increased from CAD 10,000 on January 1, 2024 due to rising living expenses and inflation.

What is a Guaranteed Investment Certificate?

A Guaranteed Investment Certificate (GIC) in Canada is a financial product that offers a guaranteed rate of return over a fixed period. It is a secure investment that assures the return of the principal amount after the term ends, highlighting its safety and reliability for students heading to Canada for studies. Below is a comparison of GICs with Savings Accounts and Term Deposits:

• Safety and return: Unlike regular savings accounts whose interest rates can fluctuate, GICs provide a fixed or variable interest rate over the term, ensuring a predetermined return.
• Investment term: GIC terms can range from a few months to several years, providing flexibility and higher interest rates for longer commitments.
• Financial security: GICs are generally insured up to $100,000 CAD by the Canada Deposit Insurance Corporation (CDIC), adding an extra layer of security.

Importance of GIC for Indian Students in Canada

For Indian students, a GIC Canada is not just a financial product but a visa facilitator under the Student Direct Stream (SDS) program. Here's why:

• Proof of financial support: Demonstrates to the Canadian authorities the student's capability to sustain themselves financially in their first year, ensuring stability and focus on studies. There are certain proof of fund that you need to showcase to study in Canada.
• SDS requirement: A mandatory component for SDS applicants, facilitating faster visa processing by evidencing financial reliability.
• Financial readiness: Acts as a declaration of the student’s financial preparedness for living and studying in Canada, encompassing not just tuition but also living expenses.
• Security and stability: Provides a guaranteed income stream for living costs, allowing students to concentrate on their education and adaptation to Canadian life.
• Introduction to Canadian banking: Serves as an early interaction with the Canadian financial system, aiding in the establishment of financial history in Canada.
• Access to services: This may assist in easier access to provincial healthcare and other community resources by demonstrating financial stability.

How GIC Works?

Understanding the operation and the GIC meaning is key for students aiming to secure their financial foundation while studying in Canada. Here's a concise breakdown:

Types of GICs:

• Redeemable GICs:

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  Offer the option to withdraw funds before the term completes, providing flexibility.
• 
  Generally feature lower interest rates due to their flexible nature.

• Non-Redeemable GICs:

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  Lock in funds for a predetermined term, prohibiting early access.
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  Offer higher interest rates as compensation for the lack of access to funds during the term.

GIC Interest Rates and Terms:

• Interest rate types:

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  Fixed interest rates ensure the rate remains unchanged throughout the term.
• 
  Variable interest rates fluctuate with the market, potentially offering higher returns.

• Investment term length:

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  Short-term options can range from 30 days to under a year, offering lower returns.
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  Long-term investments, lasting up to 10 years, typically yield higher interest rates.

Purchasing Process of GIC:

• Where to buy: Available at banks, credit unions, and trust companies, each offering unique GIC certificate products.
• Process and interest payment options: Purchases can be made online, in-person, or over the phone, with interest paid out at regular intervals or compounded and paid at maturity.

GIC Requirements for Indian Students

Under the SDS program, the current minimum GIC amount required is:

• For most of Canada, the minimum GIC amount required is 20,635 CAD. This amount is carefully calculated to cover a wide range of living expenses, including accommodation, food, transportation, and miscellaneous costs, ensuring students can comfortably settle and focus on their studies without financial strain.
• For students planning to study in Quebec, the required what is GIC in Canada amount is slightly lower, at 15,078 CAD. This difference accounts for the varying cost of living across different provinces and is aimed at matching Quebec's specific living expense estimates.

The GIC amounts required under the SDS program demonstrate Canada's commitment to providing international students with a stable financial start for their studies. Meeting these GIC requirements not only smoothens the visa process but also reassures students about their living expenses for the first year.

Choosing a Bank for GIC in Canada

Selecting the right financial institution is crucial for opening a GIC account. Prominent banks offering GICs to international students include:

• Scotiabank
• SBI Canada
• ICICI Bank Canada
• Canadian Imperial Bank of Commerce

Each of these banks offers specific GIC products tailored for international students, ensuring competitive interest rates and easy online application processes.

Opening a GIC Account: A Step-by-Step Guide

Opening a GIC account Canada is a structured process that helps ensure international students have the necessary funds to support their first year in Canada. Here's a step-by-step guide condensed into essential points:

• Select a bank: Conduct research to find a bank that offers the best combination of GIC terms, competitive interest rates, customer service reputation, and convenience. Consider both the financial aspects and the support services offered to international students.
• Application process: Prepare and submit your application, either online for convenience or in-person for a more personalized approach. This step requires documentation like your passport and admission letter from a Canadian institution. Ensure accuracy in your application to avoid delays.
• Funding your GIC: After your application is approved, transfer the required funds to your new GIC account following the bank's specific instructions for international transfers. This involves sending 20,635 CAD for most of Canada or 15,078 CAD for Quebec, from your home bank account to the Canadian GIC account.

Also Read: GIC Refund Policy And Time

GIC Withdrawal and Management

Managing your GIC account efficiently is key to ensuring financial stability in Canada. Here are some tips:

• Withdrawal rules: Understand the conditions under which you can withdraw funds from your GIC, especially if you have a non-redeemable GIC.
• Accessing funds: Banks typically disburse living expenses from the GIC to the student's account in monthly or quarterly installments.

Table: Comparison of GIC Features by Bank

Note: The above table provides a general comparison and is subject to change based on current bank policies and offers.

Disadvantage of Canadian Guaranteed Investment Certificate

GICs indeed carry many advantages to do with safety and guaranteed revenues; however, there are also considerable risks to be aware of:

Low Interest Rates:

• GICs typically offers the lowest return in comparison to other investment opportunities like mutual funds and stocks. In other words, your investments will render hardly any returns after the inflation rate is taken into account.

Lack of Liquidity:

• GICs usually come with a restriction in terms of time, which implies that you cannot touch them until the end of the term. This can be a challenge if you need the money sooner for situations that you had not foreseen.

Inflation Risk:

• Although the amount you put in is secure, the money that will buy things with it might be reducing in the future as a result of inflation. In general, this can be the case even if the interest rate of the GIC is below the inflation rate.

Taxable Income:

• The interest income from a GIC is counted as taxable income in Canada. Accordingly, the existence of your residency and tax bracket can actually deter the overall revenues on your investments.

Currency Risk:

• The value of your home currency affects the value of your investment if you are an international student and it shifts a lot against the Canadian dollar. It is especially important to convert the funds back to your home currency in the future.

Opportunity Cost:

• Putting money into a GIC could result in missed opportunities for higher returns in the case of other investment tools. By assuming more significant risk, you can choose among various solutions such as stocks or mutual funds that could give higher earnings.

Limited Growth Potential:

• GICs are providing a set rate of return, hence no possibility to achieve higher return than agreed interest which is to be understood as guaranteed return. This might be considered a drawback if you are aiming at an investment that may have the potential of increased growth.

Navigating through the requirements of the SDS program and ensuring you have the necessary funds in place can seem daunting. However, understanding the Guaranteed Investment Certificate (GIC) and how it facilitates your journey to studying in Canada is crucial. From selecting the right bank that meets your needs to understanding the process of funding your GIC, we hope this blog has illuminated the path for you.

If you're finding the GIC amount and its process overwhelming or if you're curious about pre-visa disbursement options that can aid in meeting your GIC requirements, we've got a solution. Check your eligibility with GyanDhan. We've partnered with lenders that offer pre-visa disbursement, potentially smoothing the way for your GIC and, by extension, your journey to Canada. Don't let the financial aspect of your study abroad plans hold you back. Explore your options with GyanDhan and take one step closer to realizing your academic dreams in Canada.

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