News & Resources

Automatic GIC Renewals: What You Need to Know

May 7, 2015
3 mins
A person drops a coin into a piggy bank while sitting at a table with a coffee

Since you’re reading this online, there’s a good chance your device is equipped with anti-virus software from companies like Kaspersky, McAfee or Norton, all of which renew your subscription automatically each year unless you tell them not to. Many other businesses – including magazine publishers, auto insurance providers, and fitness clubs – do exactly the same thing, largely because you gave them permission when you first signed up. So do banks, if you have an investment with a maturity date, like a Guaranteed Investment Certificate. It’s for your benefit, they maintain, so you won’t come up short, losing access or protection just when you might need it. But what happens if you think you can get a better deal elsewhere or you simply change your mind?

Renewing Or Extending Without Your Permission

In Ontario, for instance, businesses must provide you with written notice of any changes that they want to make to your contract, whether it’s being renewed or extended. They must also provide you with the option to decline the changes to your contract. Under the Consumer Protection Act, a written notice must include: If a business doesn’t follow these rules, any modifications to your contract are invalid – as are any charges or fees that are a result of such invalid changes. Simply rolling over your Sports Illustrated subscription from one year to the next probably does make life a little easier. But should you feel the same way when it comes to larger-ticket investment products like guaranteed investment certificates?

  • all proposed changes to be made to the contract
  • the date on which the change, renewal or extension would become effective
  • The manner in which you must respond to the notice (mail, email, fax, etc.)
  • the consequences of failing to reply to the notice

This GIC Will Automatically Renew At Maturity

Every GIC matures on a specific date, at which point you can collect your principal and the interest promised. But if you don't take action when a GIC matures, just what happens to your money? Usually, if you fail to instruct the financial institution to do something when your GIC matures, it will be rolled over to a similar investment product at the prevailing rate. That means if you want to reinvest into another certificate, but rates are now better elsewhere, you won't have the opportunity to switch to the higher-rate product. If the GIC into which your investment is to renew isn’t available at maturity, the bank or credit union will renew it into one that it believes is the closest match.

How Much Time Do I Have?

Before you sign up, ask the financial institution how it provides notice of maturity and how much time you'll have between the notice and your deadline to take action. To protect yourself, update your contact information on an ongoing basis and make sure you open any mail immediately. Here’s the fine print in a typical agreement to purchase. For example, if you want to do something different with your money, CIBC typically requires that you tell them at least four days before the GIC matures. Renewal confirmations and other items are deemed to be received five days after they’re sent by mail. Many deposit takers offer a grace period following the maturity of a GIC, but again find out the specifics in advance. You generally have at least 10 days to contact the financial institution and cancel the new GIC if you don’t wish to renew.

Gordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a consulting firm focusing on retirement readiness. Gordon was a columnist for the Globe & Mail and Morningstar for many years and is also currently a columnist for Investment Executive, Canada’s national newspaper for financial advisors.

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