How to choose the right Guaranteed Investment Certificate (GIC) for your study permit
Moving to Canada to study can unlock exciting new opportunities for international students. For many, it’s also their first time living in a new country and taking responsibility for their finances.
If you’ve been accepted to a Canadian designated learning institution, the next step on your agenda is to apply for a study permit. To qualify for a study permit through the Student Direct Stream (SDS), you need a Guaranteed Investment Certificate (GIC) from a Canadian financial institution to prove you can support yourself financially in Canada. However, as an international student, a GIC can be valuable for more than just your study permit application. In this article, we delve into how GICs work, why you need one, and share tips on how to choose the right GIC for your study permit.
What is a Guaranteed Investment Certificate (GIC)?
A Guaranteed Investment Certificate (GIC) is a risk-free investment product offered by banks and other financial institutions in Canada. When you purchase a GIC, the bank guarantees your investment and pays interest on your principal for a fixed period (maturity period), usually between 30 days to ten years. GIC investments are risk-free because your initial investment of up to $100,000 CAD is insured by the Canada Deposit Insurance Corporation (CIDC) or by a provincial insurance company.
GICs are popular among international students and other individuals who want to receive regular income from their investments and earn interest.
Depending on the product you choose, the funds invested in a GIC may be locked-in for the duration of your term or redeemable before maturity––although redeemable GICs typically have lower interest rates.
There are three types of GICs in Canada, each with their own way of calculating returns or earnings.
Guaranteed Return GICs: These GICs offer a fixed interest rate and guarantee both your principal and interest.
Interest Rate-Linked GICs: These GICs offer a variablerate of interest that’s linked to the financial institution’s prime rate. Your principal is guaranteed, but your earnings may vary over your term, depending on interest rate fluctuations.
Equity-Linked GICs: Like other GICs, equity-linked GICs guarantee your principal but offer a variable interest rate based on the performance of the stock portfolio it invests in. Banks like the Royal Bank of Canada (RBC) also offer equity-linked GICs that guarantee a minimum rate of return with the potential for significantly greater earnings.
Why do you need a GIC as an international student in Canada?
Demonstrate proof of financial support for SDS
Your study permit may be eligible for faster processing through the Student Direct Stream (SDS) if you receive admission into a Canadian learning institution and are a legal resident of one of 14 countries (India, China, Philippines, Brazil, Vietnam, Antigua and Barbuda, Colombia, Costa Rica, Morocco, Pakistan, Peru, Senegal, Saint Vincent and the Grenadines, or Trinidad and Tobago).
When you apply for a study permit through the Student Direct Stream, you require a Guaranteed Investment Certificate (GIC) of $10,000 CAD with a participating financial institution to prove you have sufficient funds to support yourself and your family in Canada throughout your study period.
Cover living expenses in Canada
Your cost of living in Canada as an international student can be quite high, but a GIC can help cover some or all of your living expenses, including accommodation, utilities, groceries, phone, and entertainment expenses. It’s important to note your GIC is not meant to cover your tuition expenses. You need to submit proof of having paid tuition for your first year of study separately.
With an international student GIC, you receive a portion of your investment as income each month, rather than the entire amount as a lump sum, so you can budget and manage your finances better as you settle into your new school and life in Canada.
Easy access to your funds and the opportunity to earn interest
Even if you don’t qualify for the SDS program, you still need to submit proof of financial support for your study permit application. In this case, you don’t necessarily need a GIC from a participating Canadian financial institution and can also submit proof of a student loan, scholarships, or other forms of funding, proof that you paid tuition and housing fees, or documents showing sufficient funds in your bank account(s). However, opening a GIC can make it easier to access your funds once you arrive in Canada and allows you to earn interest on your money.
After you receive an acceptance letter from a Canadian learning institution, you require a Guaranteed Investment Certificate to apply for a study permit through the Student Direct Program. Some Canadian financial institutions, like RBC, allow you to sign up for an investment account online and transfer funds directly from your home country to purchase a GIC.
International students must purchase a one-year non-redeemable GIC of $10,000 CAD to qualify for the SDS program. International student GICs are Guaranteed-Return GICs that earn a fixed rate of interest predetermined at the time of purchase. Once you wire the funds to the financial institution and purchase a qualifying GIC, you’ll receive an Investment Confirmation or GIC contribution details document.
How to apply for your study permit through SDS
When you start your study permit application through the SDS stream, you need to attach the GIC Investment Certificate from the bank as proof of funds.
In addition, you must usually provide proof of your residency in an SDS-eligible country, your acceptance letter from a post-secondary learning institution in Canada, proof of tuition fee payment for the first year of your study program, and results from an eligible language test (IELTS for English or TEF for French). You may also need to get a medical exam and police certificate to apply for a study permit.
How to access your funds after you arrive in Canada
When you arrive in Canada, you must visit your bank branch to verify your identity, confirm details of the personal account (usually a chequing account) into which you want to deposit your GIC payments, and provide payment instructions for deposits. If you don’t yet have a chequing account, you can open a student account at a bank of your choice. If you have a GIC with RBC, having a student account with RBC will make transfering your monthly payouts to your account seamless.
Once you verify this information, your initial GIC will be redeemed for its full value, which includes your principal investment and accrued interest. An initial payment of $2,000 CAD will be deposited to your personal deposit account, and the balance funds will be invested in a new GIC.
How to receiving monthly income from your GIC
The principal amount in the new GIC will be split into 12 equal payments which, along with earned interest, you will receive every month for one year. This secure investment will allow you to earn interest and receive a fixed monthly income to cover some or all of your living expenses in Canada while you study.
How to apply for an RBC GIC
International students who are residents of India, China, Antigua and Barbuda, Brazil, Colombia, Costa Rica, Peru, Saint Vincent and the Grenadines, and Trinidad and Tobago can purchase a GIC with the Royal Bank of Canada (RBC) from their home country.
Students from eligible countries can apply for a GIC with RBC online. Simply fill out the application on RBC’s secure portal and upload your documents. Once your documents are reviewed, RBC will open your investment account within three business days and send you instructions on how to wire funds to purchase an RBC GIC. You’ll receive an Investment Confirmation or GIC Contribution Details Document a few days after your funds are received.
When you arrive in Canada, you’ll need to book an appointment and visit an RBC branch to verify your identity and set up your GIC redemption payments. You should bring the following documents with you for your appointment:
Your study permit
During your appointment, you can also open a chequing account with RBC to serve as your personal deposit account.
Tips on choosing the right GIC as an international student
Make sure the bank you choose has a good presence in Canada: Some international students open GICs with a bank in their home country that operates in Canada through a subsidiary or partner bank. While this may seem more convenient at the time of application, it can place hurdles in accessing your funds once you arrive in Canada. Ideally, you want to choose a bank that has a good presence in your province in Canada, so you can find a bank branch close to your location.
Check if the bank offers GICs in your country: Most Canadian banks only offer GICs to international students in limited geographies. For instance, RBC offers international student GICs in India, China, Antigua and Barbuda, Brazil, Colombia, Costa Rica, Peru, Saint Vincent and the Grenadines, and Trinidad and Tobago.
Evaluate student bank accounts offered by the bank: Getting a GIC is only the start of your banking relationship with a Canadian financial institution. You also need a chequing account to receive funds from your GIC each month. Opening a chequing account with the same bank can make the transactions seamless and help you consolidate your finances. Some banks, like RBC, have specialized student banking products to better meet your financial needs. Be sure to explore other financial products, including credit cards, and compare banking fees and offers to choose the right bank account.
Compare interest rates: The interest you earn on your GIC will vary depending on the bank you choose. Make sure the quoted interest rate is competitive before opening your GIC.
Compare GIC fees: Banks typically charge a handling fee to open an international student GIC. This amount—usually a few hundred dollars—should be added to the funds you wire to the bank while opening your GIC.
Look at how the money will be paid to you: Canadian banks may have different payment schedules for international student GICs. For instance, with an RBC GIC, you receive a $2,000 initial deposit, followed by 12 equal monthly payments from the remainder of your principal and interest. As an international student, receiving a larger initial payment is useful since you’ll need funds to set up your place of accommodation and buy essential items.
Flexibility to deposit more funds: If you plan to deposit more than the minimum required funds in your GIC (over the $10,000 CAD requirement), check if the bank allows it.
Application process: In any banking relationship, convenience is key. Banks like RBC have a simple online application process for international student GICs. Once you arrive in Canada, you can book an appointment to visit your nearest RBC branch and start receiving funds.
GIC processing time: If your study permit application has a strict deadline or if you started the process late, banks that offer faster processing times may be a better choice.
Ease of getting a refund: As an international student, there may be a slight chance that your study permit application is rejected or you decide not to study in Canada. In such cases, you’ll need to get your GIC investment refunded. Make sure the bank you choose has a simple, convenient refund process for international student GICs.
As you gear up to start your journey as an international student in Canada, you’ll need a GIC as part of your study permit application through the Student Direct Stream. A GIC is more than just proof of funds; it gives you ongoing income to offset some of your living expenses during your study period. However, not all GICs are equal and it’s important you choose a bank that offers you convenience, competitive interest rates, and other specialized student banking products so you can avoid financial worries and focus on your studies in Canada.
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.
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