Convenience has its cost, GIC investors.
If you deal with a big bank, you may get a renewal notice when your guaranteed investment certificates come due. It basically sets out the amount of principal you have, the maturity date of your existing GIC and the rate being offer on renewal, which can occur automatically.
One Globe reader’s experience shows why you should never accept the proposal renewal rate without first checking to see if you can do better. “My partner and I use different banks, but both have GICs that automatically renew at our request,” this reader said in an e-mail. “Both banks have exploited us by issuing new low interest rate GICs.”
Not too long ago, this reader received a renewal notice from his bank with what was described as a premium 15-month interest rate of 1.2 per cent. The word premium was underlined in bold in the letter. Small print elsewhere in the note said recipients have 10 business days from issue to cancel the transaction; otherwise, it becomes final. This reader took advantage of this loophole and recommends others with automatically renewing GICs to do the same. “When I complained by phone, I got a GIC with 1.85 per cent [for 18 months].”
Mortgages work similarly to GICs in automatic renewals. Banks know a lot of their clients are too vigilant to accept the expensive rates offered via automatic renewal, but there’s a slice of the customer base that falls in line. The best defence is noting the maturity date of your GICs or mortgage and then giving yourself a six-week window to find a good deal. Look at where rates are to get a sense of the marketplace, and then call your lender or GIC provider to see what kind of a deal you can get. Haggle as required, and be prepared to shift take your business elsewhere. Finally, see if your promised GIC rate can be increased if your provider boosts its rates before your new term begins. Most lenders do similar with mortgages: If borrowing costs happen to fall between the time you arrange your mortgage and the actual start or renewal date, you get the lower rate.
A few websites you can use to compare GIC rates (and mortgage rates):