To know about GIC, the first thing that you need to know is what is GIC. GIC stands for Guaranteed Investment Certificate. It is a safe and secure investment where there is very low risk involved. The best part about GIC is that you do not have to worry about losing the money that you have invested. In this article, we will see in detail about the important things that you need to know about GIC.
GIC works like a savings account. You will have to deposit a particular amount in it, and you will earn the interest on the money that is deposited. The most important thing that you need to know is that you have to leave the money for a particular period of time. Withdrawing the money from the GIC account will lead you to pay the penalty. The GIC works in such a way that you come to an agreement with the bank stating that you will deposit the money in the bank for a particular period of time. It might vary from a few months to a few years. The longer the money stays in the account, the interest will be higher.
The minimum investment
One of the most important things that you need to know when it comes to GIC accounts is that the minimum deposit that you can make is five hundred dollars. Anything less than five hundred dollars will not be accepted in a GIC account.
We all know for a fact that for most of the investments there will be a minimum operational fee. But when it comes to GIC, there is no fee involved. This is one of the biggest advantages when it comes to GIC.
The interest rate
The interest of GIC is purely dependent on the term of deposits (six months, one year, two years and max up to five years). The term will end on the date of maturity. The Gic rates will be higher for longer terms. In very few instances, there will be variable interest rates.
The payment method
The interest on the deposit that you have made in your GIC can be paid differently. It can be paid on a monthly basis, yearly basis or on the maturity date.
The tax for interest
The interest that you will be getting out your deposit in your GIC is taxable. But if you are holding the GIC is accounts like RRSPs, RRIFs and TFSAs you need not pay the tax for the interest that you will be getting. If the GIC is being held in any other account, you might have to pay the necessary taxes.
The interest rate
Most of GICs have a fixed interested rate. So everyone will be clear about the final amount that they will be getting. There are a few GICs that have a variable interest rate. It is entirely based on market fluctuations.