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Premium Savings Bonds - Investing in Canada Premium Savings Bonds - What are Premium Savings Bonds?, How to Buy Premium Savings Bonds

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Like many other countries, Canada issues savings bonds for the purpose of investing in the country and offering an interest-bearing return to investors. Canada offers two different types of bonds: standard savings bonds and premium savings bonds.

What are Premium Savings Bonds?

Premium savings bonds issued by the government of Canada were first introduced in 1998. They offer higher interest rates over standard savings bonds issued at the same time. Otherwise, they have all of the features of a standard savings bond with a few exceptions. Both bonds are available to purchase by all Canadians. The term for savings bonds to reach full maturity is ten years. Rates, however, are not fixed. They are fixed for a stated period, but can change after that period but before they reach maturity. All rates are set and announced by the Minister of Finance based on the current economic market.

The major difference between standard savings bonds and premium savings bonds, besides the interest rate, is that standard savings bonds can be redeemed at any time while premium savings bonds cannot. Premium savings bonds can only be redeemed on the anniversary of the issue date and up to 30 days thereafter. After the 30 days has elapsed, bearers must wait until the next anniversary to redeem the bond. The interest rates for premium savings bonds are fixed for up to the first three years. The rate is variable for the remaining seven years.

Premium savings bonds are available for purchase in these denominations: $100, $300, $500, $1000, $5000, and $10,000.

Other shared qualities of both types of savings bonds include the following:

• Backed by the Canadian government
• Rate of return is guaranteed
• Can be purchased in either regular interest bonds or compound interest bonds

How to Buy Premium Savings Bonds

Premium savings bonds in Canada are only available for sale from a date in early October to the December 1 of each year. They can be purchased through one of several methods:

• Banks or Investment Firms – Premium savings bonds can be purchased at nearly every Canadian bank, trust, credit union, or caisses populaires. Other financial institutions often carry them as well, such as financial brokerage companies and investment firms.

• Employers – Many employers participate in the Canada Payroll Savings Program. If your employer participates, you can purchase premium savings bonds through the program through a payroll deduction.

• Phone – Premium savings bonds can be purchased directly through Canada Savings Bonds (CSB) by calling toll-free 888-773-9999 Monday through Friday, 8am to 8pm during selling dates.

• Online – Bonds can also be purchased online directly through the CSB website.

Standard and premium savings bonds can also be purchased as gifts through any of the above channels. Printable, full-color gift cards are available online to be given with the bond.

How to Redeem Premium Savings Bonds

Standard and premium savings bonds are just as easy to cash as they are to buy. They can be cashed in at nearly any bank or financial institution in Canada. Interest is paid when the bond is cashed after three months from the issue date. Interest is paid on a monthly basis up to the previous full month from the month in which it is being cashed. For premium savings bonds, this means that the interest paid is always for a term of one or more years. Because they can only be redeemed on the anniversary date and up to the 30 days after the anniversary date, extra months cannot be paid.

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