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Where to find the best GIC rates in Canada
Learn how to compare GICs, how to find the right type of GIC for your investment needs and find the best GIC rates in Canada.
A guaranteed investment certificate, or GIC, is a type of investment that provides a guaranteed return over a specified time period. You can invest in GICs through major banks as well as alternative financial institutions like Tangerine and EQ Bank, and they’re considered a low-risk way to build your wealth.
But which bank is offering the best GIC rates in Canada? The answer depends on the type of GIC you choose and the term of your investment.
In this guide, we’ll explore the different types of GICs available, such as redeemable, non-redeemable, cashable, non-registered and market-linked, and explain how GICs fit into your savings plan that includes TFSA, RRSP and even RESP. We’ll also show you how to find the best GIC rates in Canada and the other factors to consider when choosing a GIC.
What is a GIC?
GIC stands for guaranteed investment certificate. A GIC is an investment product that lets you earn a guaranteed rate of interest on your savings. In return, you have to invest your money for a term ranging from as little as one month to as long as 10 years — and as a general rule, the longer the term you choose, the higher the GIC interest rates you can access.
Interest could be paid at regular intervals, such as monthly or quarterly, or when the GIC term ends. When your term expires, you’ll get the interest you earned on your account plus the amount you originally deposited.
GICs are generally considered a safe and low-risk way to invest your money, so it’s important to find the best GIC rates to maximize your return. However, there are many different types of GICs, and the best one for you will depend on your financial needs and savings goals.
How do GICs work?
Investing in a GIC requires you to deposit your money with a bank or financial institution for a fixed period. Think of it as if you’re lending money to your bank — in return for giving them access to your money, they’ll pay you interest at a guaranteed rate.
GICs let you earn a higher interest rate than you can typically get with a normal savings account. Interest rates can be either fixed or variable, but they don’t offer the same potential high rate of return as investing in stocks or ETFs.
For example, you might earn $40 per year on a $1,000 investment with a fixed rate of 4%. Invest $15,000 at the same rate and you’ll earn $600 in interest.
Most GICs require you to lock in your money until the term ends. However, with cashable and redeemable GICs you can withdraw your money before the end of the term, but you’ll need to accept a lower interest rate and usually pay a penalty for accessing the funds early.
Find the best GIC rates in Canada
Searching for the best GIC rates in Canada? Use our table to quickly compare GIC interest rates from various big five banks, online banks and fintech disrupters:
| Financial Institution | 1-Year term | 2-Year term | 3-Year term | 4-Year term | 5-Year term |
|---|---|---|---|---|---|
Achieva | 3.5% | 3.5% | 3.35% | 3.35% | 3.5% |
2.75% | 2.75% | 2.8% | 2.8% | 3% | |
BridgeWater Bank | 3.34% | 3.37% | 3.39% | 3.2% | 3.43% |
3% | 3.1% | 3% | 3% | 3.25% | |
Coast Capital | 3% | 3.1% | 3.15% | 3.2% | 3.4% |
3.5% | 3.55% | 3.55% | 3.55% | 3.65% | |
2.8% | 2.8% | 2.9% | 2.95% | 3% | |
3.25% | 3.45% | 3.35% | 3.55% | 3.6% | |
Oaken Financial | 3.5% | 3.6% | 3.6% | 3.6% | 3.65% |
2.55% | 2.65% | 2.65% | 2.7% | 2.75% | |
2.7% | 2.75% | 2.75% | 2.75% | 2.85% | |
3.15% | 3.05% | 3.05% | 3.44% | 3.44% | |
3.45% | 3.5% | 3.5% | 3.5% | 3.55% | |
2.8% | 2.85% | 2.65% | 2.7% | 3% | |
Vancity | 2.75% | 2.8% | 2.85% | 2.75% | 2.9% |
Choose the best GIC
There are plenty of GICs to choose from in the Canadian marketplace. To help you choose the best GIC for your specific needs, here is a list of the types of GICs found in Canada, along with a brief explanation of how each type of GIC works.
Government guarantees on GICs
The money invested in almost all GICs are covered under Canadian Deposit Insurance Corporation (CDIC) insurance or provincial insurance. Under CDIC, or the provincial equivalent, all investments or accounts under $100,000 are 100% insured. Should the financial institution collapse or fail to pay-out, for any reason, the government will reimburse you the full amount.
Fixed-rate GIC
A fixed-rate GIC gives you a set rate for the duration of your term. This gives you peace of mind since you know exactly how much you will earn from your investment, even if the market takes a downturn. This makes fixed-rate GICs a safe and secure choice, but it also means they have lower GIC rates than variable-rate products.
While fixed-rate GICs typically come with lower interest rates, in recent years, fintech disrupters and online banks began offering competitive rates on fixed-rate GICs. For instance, EQ Bank, an online bank with no-fee savings and spending accounts, offers a 1-year GIC with a fixed rate of 4.75%.
EQ Bank GIC
3.5%
Interest Rate
Interest Rate
1 year
Term
Term
$100
Min. Investment
Min. Investment
EQ Bank GIC rates are some of the highest interest rates that you can get for GICs in Canada. The EQ Bank GIC is held in a nonregistered account and offers a rate of return. The EQ Bank 5 Year GIC offers a 4.75% rate of return and can be held in a registered TFSA or RSP. You can start investing with as little as $100.
| Interest rate | 3.5% |
|---|---|
| Term | 1 year |
| Min. Investment | $100 |
| Min. Deposit to open | $100 |
Why invest in a fixed rate GIC?
Fixed rate GICs are a safe and secure investment option because they are guaranteed to protect your principal. They are also more reliable and predictable because you know exactly how much interest you’ll earn on the money you put in over the term of your investment.
These investments are a suitable option if you only want to lock your money away over a short period of time (with terms usually lasting a couple of months or years). They can also be a good fit if you want to balance risk in your portfolio, given that they protect your cash from fluctuations in the stock market.
Drawbacks of fixed rate GICs
There are relatively few drawbacks of fixed rate GICs since they are inherently low-risk investments. That being said, watch out for these potential problem areas.
- Lower return. The interest you make may be lower than what you might earn by investing directly in the stock market (or in a market-linked GIC).
- Unable to cope with inflation. Long-term fixed rate GICs may not be able to keep up with inflation, leading to an overall loss on your investment.
- Interest subject to taxation. Any interest you earn on your GIC is subject to taxation if the GIC is held outside of your TFSA, RRSP or RESP.
Laddered Fixed-Rate GIC
Some banks also offer GICs with interest rates that increase each year of your term. For example, the RateRiser Plus GIC from BMO offers an interest rate of 3.70% in the first year, then escalates to 3.80% in the second year, 4.00% in the third year, 4.10% in the fourth year and 4.15% in the fifth year.
Variable rate GIC
A variable rate GIC fluctuates in line with the prime rate of your bank or financial institution. So if the bank raises its prime rate, its GIC interest rates go up too.
This allows you to take advantage of rising rates to maximize your returns. Of course, it also means that your returns could be lower than expected if interest rates fall.
Market-linked GICs
A market-linked GIC is a type of variable-rate GIC, but the interest rate applied to the GIC is not linked to the prime rate, but rather a stock market index such as the S&P/TSX 60 Index.
A market-linked GIC allows investors to invest in a guaranteed investment product that is tied to the highs — and lows — of the stock market.
Often advertised as market-growth GICs, these market-linked GICs offer the potential for higher returns, but they also come with a greater level of unpredictability.
To help keep the guarantee of a GIC, and minimize payouts during strong equity markets, most market-linked GIC providers will impose a minimum and maximum limit on returns. This allows market-linked GICs to offer the peace of mind of traditional GICs — by guaranteeing 100% principal protection — while taking advantage of the higher return potential of the stock market.
For example, the Canadian Banking & Utilities GIC from TD has a maximum return of 30% over a 3-year term, but in bear markets when stocks underperform, the guaranteed minimum interest is 3%.
Why invest in a market-linked GIC?
Market-linked GICs are a safer way to earn interest from the stock market because they are guaranteed to protect your principal. They can also be a more lucrative investment than a fixed-rate GIC because your interest rates can climb much higher, depending on how well your index is performing.
These investments are a suitable option if you don’t mind locking your money away over a longer time period (with terms usually lasting 1-10 years). They can also be a good fit if you want to balance risk in your portfolio, given that they protect your principal investment.
Drawbacks of market-linked GICs
Since market-linked GICs protect your principal, there are relatively few drawbacks to investing in one. But there are a few problem areas to keep in mind.
- Lower return. The interest you make may be lower than what you might earn by investing directly in the stock market (or in a fixed rate GIC).
- Less flexibility. You won’t be able to make changes or rebalance your portfolio when your index is performing poorly.
- Capped return. Some GICs will hide a “maximum return” cap in your contract to limit your earnings if the index you invest in performs really well.
- Partial earnings. Your issuer will keep a portion of your profits if the fund performs well.
- Interest subject to taxation. Any interest you earn on your GIC is subject to taxation if the GIC is held outside of your TFSA, RRSP or RESP.
- Less transparency. Formulas used to calculate interest are complex and it can be difficult to understand why you received (or didn’t receive) a return.
Registered GIC
The difference between registered and non-registered GICs comes down to the accounts in which they are held. Registered GICs can be held in any registered tax account, such as a Registered Retirement Savings Plan (RRSP), a Registered Education Savings Plan (RESP) and a Tax-Free Savings Account (TFSA).
Quite often, interest rates on registered GICs are higher than on non-registered GICs, however, potential penalties and restrictions make it more difficult to access the funds investing in a registered GIC, once it matures. Another aspect of registered GICs is that the initial investment cannot exceed the contribution room of the registered account. For instance, if you only have $1,000 in contribution room left in your TFSA, you cannot purchase a registered GIC for $2,000, without incurring a penalty.
Non-registered GIC
Non-registered GICs are exactly the same as registered GICs, but are not held in tax-preferred accounts, such as an RRSP or TFSA. This means all earnings from a non-registered account are taxable in the year of accumulation and must be declared when filing your taxes.
Short-term GICs
Short-term GICs mature in less than 365 days and typically offer lower interest rates. The advantage of a short-term GIC is that it allows you to earn a higher rate of interest on your invested money when compared to the interest rate of a savings account or a high-interest savings account.
Since a short-term GIC matures in a shorter period of time, they are ideal for investors who want to earn more on their money without having funds locked in for too long.
Long-term GICs
Long-term GICs usually come with higher interest rates and have terms between one and 10 years. If you’re investing with a long-term savings goal in mind, this makes them well worth a look. Keep in mind, long-term GICs offer higher interest rates, but your investment money is locked in for the specified term, meaning you won’t get access to that cash until the GIC matures.
Foreign currency GICs
A foreign currency GIC accumulates interest in a foreign currency like the US dollar, British pound or euro. Foreign currency GICs are beneficial if you believe a certain currency will do well over a period of time, or you frequently travel to that region and want to hedge your expenditures using the guarantee of GIC earnings.
The downside is that, unlike local investments, foreign currency GICs are not covered by CDIC insurance, plus they often come with lower interest rates than their Canadian GIC counterparts.
Why invest in foreign currency GICs?
Foreign currency GICs can be beneficial because they give you the potential to earn money on interest and exchange rates. With these GICs, you risk losing some of your principal investment if the Canadian dollar performs well during your term, but you also have the potential to get a higher return on the principal (plus interest) if the Canadian dollar performs poorly. For Canadians, a US dollar GIC is the most common foreign currency GIC purchase.
These investments can also be handy if you want to “buy” foreign currency when exchange rates are good so that you don’t have to exchange money at lower rates when you travel. They can also be a suitable option if you have a foreign income that you would rather invest directly without converting into Canadian dollars.
As a rule of thumb, you should only invest in these GICs if you’re confident that the Canadian dollar is on a long-term downward trend to avoid losing money on your principal investment.
Drawbacks of foreign currency GICs
There are a couple of factors to consider before you invest in a foreign currency GIC.
- Lower interest. The interest you make will typically be lower than what you might earn on a domestic GIC.
- Lower return on principal. If the Canadian dollar performs extremely well, you could lose money on your principal investment when you exchange it back to Canadian dollars.
- Less flexibility. You won’t be able to make changes or withdraw your funds if the Canadian dollar starts doing really well.
- Conversion costs. If you use Canadian dollars to buy a foreign GIC, or a US dollar GIC, you’ll lose money when your bank exchanges your funds into your foreign currency.
- Interest subject to taxation. Any interest you earn on your GIC is subject to taxation if the GIC is held outside of your TFSA, RRSP or RESP.
- No insurance. Unlike domestic GICs, foreign exchange GICs ( aren’t protected by the Canada Deposit Insurance Corporation (CDIC).
Cashable GICs
For a more flexible option, consider a cashable GIC. There are two good reasons when a cashable GIC makes sense:
- You’re uncertain about when you’ll need to dip into those investment savings.
- You’re uncertain about the market and want to take advantage of changing market conditions.
Since cashable GICs let you cash your GIC investment in before maturity, a cashable GIC gives you the flexibility to invest at a competitive interest rate, but the flexibility of cashing out to reinvest, should the market change.
Most cashable GICs are 1-year GICs; however, most cashable GICs have a waiting period during, when your money is locked in and redemption aren’t allowed. These waiting periods are usually 60 or 90 days from purchase date. Once the waiting period ends, you are free to redeem — or cash-in — the GIC, without incurring a fee or penalty.
The one drawback is that cashable GICs usually come with lower GIC interest rates than traditional GICs.
Why invest in a cashable GIC?
A cashable GIC is a flexible and reliable investment option if you need quick and easy access to your money. It offers a guaranteed return for a short-term commitment, which can be useful if you’re looking for liquidity in your investments or anticipate you’ll need funds to make a large purchase in the near future.
These types of investments can also be used strategically to help maximize your returns when interest rates go up. This is because they allow you to cash out and re-invest in higher interest rate GICs at no extra cost. They are also often used as a short-term investment plan for those who want to earn a decent return on emergency or “rainy day” funds.
Drawbacks of cashable GICs
Cashable GICs are relatively low-risk investments but there are a couple of drawbacks you should watch out for.
- Lower interest. The interest you make on a cashable GIC will be lower than what you can earn on a non-redeemable GIC.
- Uncashable for up to 90 days. You may not be able to cash out your GIC for a period of 30-90 days, which can cause trouble if you need emergency funds.
- Interest subject to taxation. Any interest you earn on your GIC is subject to taxation if the GIC is held outside of your TFSA, RESP or RRSP.
Non-redeemable GICs
Non-redeemable GICs offer less flexibility, so if you want to access your money early, you’ll need to pay a penalty. The advantage of non-redeemable GICs is the higher GIC interest rate. The disadvantage of non-redeemable GICs is that your money locked in for the full investment period term. That means if you invest in a 1-year non-redeemable GIC, you will not get access to the principal or interest earned until the term is complete. The same applies for 3-year GICs and 5-year GICs, or any other term.
Why invest in a non-redeemable GIC?
Non-redeemable GICs are a low-risk and reliable investment option. They offer a guaranteed return while also protecting the principal you invest. This means that if you put $5,000 into a fixed rate GIC over 1 year at a 2% interest rate, you will earn $100 in interest. And you’ll get this money back (plus your principal of $5,000) when your investment matures.
While non-redeemable GICs are less flexible than cashable GICs, they offer interest rates as much as 1-2% higher to compensate. These GICs can be a good fit if you have spare cash sitting around that you want to earn a higher return on. For example, perhaps you received a surprise inheritance that you want to start collecting interest on straight away and you haven’t yet decided what you want to do with that money in the long-term.
If you choose to go with a fixed rate GIC instead of a market-linked GIC, you can also use non-redeemable GICs to balance risk in your portfolio, given that they protect your cash from fluctuations in the stock market and offer a guaranteed return on principal.
Drawbacks of non-redeemable GICs
Non-redeemable GICs are relatively low-risk investments but there are a couple of drawbacks you should watch out for.
- No liquidity. Non-redeemable GICs don’t offer a great deal of liquidity, which means you may need to pay a penalty to free up funds in the event of an emergency.
- Low rate of return. Your profits may not be as lucrative as they could be with a market-linked product (provided the stock market is doing well).
- Unable to cope with inflation. Long-term fixed rate GICs may not be able to keep up with inflation, leading to an overall loss on your investment.
- Interest subject to taxation. Any interest you earn on your GIC is subject to taxation if the GIC is held outside of your TFSA or RRSP.
Redeemable GICs
Redeemable GICs are similar to cashable GICs in that they allow you to access your money earlier, if needed. The key difference between a redeemable GIC and a cashable GIC is that you won’t have to wait for a non-redemption period to pass, before cashing out. While cashable GICs will have a non-redemption waiting period between 60 to 90 days, redeemable GICs have no restrictions.
How to compare GICs: The different features to consider
You’ll want to consider the following features when comparing GICs:
- Term. The length of time that your money will be tied up in a GIC varies, with terms ranging from 30 days to 10 years. Longer terms typically offer higher interest rates, but not always, for instance the 5-year Tangerine GICs offers an interest rate of 4.05%, while the 1-year Tangerine GICs offers a GIC interest rate of 4.65%. The GIC terms available will vary depending on the financial institution but typically range from 90-day to 5-year, with fewer banks and online financial institutions offering 30-day and 60-day GICs or terms over five years.
- Interest rates. GICs offer interest rates between 1% and 5.5%, with most paying out interest on an annual basis or when the investment matures. The advantage of GICs is that the interest compounds on longer terms — so the money earned in year one, also accrues interest.
- Minimum deposit. Most lenders require a minimum deposit of at least $500 for registered GICs — GICs held in RRSPs, RESPs and TFSAs — and $1,000 for non-registered GICs. Be mindful that contribution room is also a factor when purchasing registered GICs.
- Withdrawal conditions. You’ll need to wait until the end of your term to get access to your principal investment and your earnings. The exception to that is when you purchase a GIC with cashable options — specifically, when you invest in cashable or redeemable
- GICs. If there are no provisions to allow you to access money, then an early redemption or withdrawal may trigger a penalty or the forfeiture of any interest earned on the investment.
- Suitable duration. When purchasing a GIC, keep in mind when you may need the initial invested money. If you require access to these funds in the short-term, then invest using a short-term GIC or a cashable GIC, may be best. If you don’t have any issues with cash flow, you can probably take out a longer-term non-redeemable GIC with a higher interest rate. The aim is to weigh the interest earned with the length of time your money is locked into the investment product.
- Easy tracking. Some GICs offer mobile banking apps so that you can check the balance of your account easily. Others offer regular statements and online platforms to help you monitor your savings. Look for a provider that communicates with you regarding your investments.
Are GICs a good investment?
The answer to this question really depends on your financial situation, your risk tolerance and investment goals.
Owning a GIC is considered one of the safest ways to grow your assets over time. As part of a diversified portfolio, a GIC is considered fixed income — a conservative, stable investment that can offer a return even during market volatility.
One advantage of GICs is that the principal sum invested — your money — is guaranteed. This means, there is no risk of erosion of principal or loss due to market fluctuations. Depending on the GIC you purchase, the quoted GIC interest rate is also guaranteed, which means that despite market conditions, you will earn that quoted interest rate when the GIC matures.
However, all this stability and security does come at a price. GICs don’t offer the same potential for high returns as other riskier investments. Without proper planning, GICs can also under-perform, particularly in higher inflation market. For examples of good planning, please see laddering your GICs over several terms.
Calculate how compound interest affects GICs
Guaranteed Investment Certificates (GICs) allow you to lock in a certain amount of money at a specified rate for an agreed period of time, usually one to five years although terms can last as long as 10 years. To help appreciate the power of this savings product, try using this compound interest calculator. Using this interest calculator helps illustrate how much interest you could earn depending on the interest rate and how often interest is compounded.
To use the interest rate calculator, input the interest rate offered on the GIC, the amount you are investing and the length of time.
The pros and cons of a GIC
GIC pros
GICs come with a number of features that make them a worthwhile investment to pursue.
- High interest rates. Enjoy higher interest rates with GICs than with most savings accounts or high-interest savings accounts.
- Low-risk investment. Earn guaranteed interest rates and get a guaranteed return on your principal when it’s time to cash out your investment.
- Portfolio diversification. Use your GICs to balance out your portfolio so that you can continue to build up your savings without taking on additional risk.
- Tax-efficient earnings when used in registered accounts. Hold your GICs in a registered account such as a TFSA or RRSP to maximize tax-efficiency on your investment savings.
- Deposit insurance. Relax knowing that each investment product or account is protected, up to $100,000, by the Canada Deposit Insurance Corporation (CDIC) if the GIC provider is a CDIC member.
GIC cons
GICs also include a handful of drawbacks you should be aware of before investing.
- Lower return than higher-risk investments. You could end up with a lower return on interest than you might get with more risky investments such as equities.
- Can’t keep up with inflation. GICs with longer terms are usually unable to keep pace with inflation – meaning you could lose money on them over time.
- Locked-in funds. You’ll have to lock in your money with most GICs, and you could incur significant penalties if you redeem them before your term is up.
- Minimum balance. You may need to invest a minimum of $500 or more to sign up for a GIC, which makes this type of investment less accessible for low-income earners.
- Taxable interest. You’ll pay tax on any interest you earn unless you hold your GIC in a registered account.
Are GICs taxable?
Since many investors hold interest-bearing investments, like GICs, in registered accounts it can be confusing as to whether or not GICs are taxable? The short answer: Yes.
Any interest earned is considered taxable, in Canada. However, you can reduce or eliminate taxes owed, if you hold an interest-bearing investment inside a registered account, like an RRSP or TFSA.
Interest from GIC investments are taxed as interest income. The tax rate is based on your marginal rate — the tax bracket on the next dollar earned.
For example, let’s say you’re an Ontario resident who earns $50,000 in employment income plus $5,000 in investment interest, including GICs, for total income of $55,000. Based on this, your federal marginal tax rate will be:
- 15% on the portion of taxable income that is $53,359 and under, plus
- 20.5% on the portion of taxable income over $53,359
While your provincial marginal tax rate is:
- 5.05% on the portion of your taxable income that is $49,231 or less, plus
- 9.15% on the portion of your taxable income over $49,231
In this example, this Ontario resident would end up paying a total of 20.05% on all earnings below $49,231 — about $9,870 in taxes owed. Plus, another 29.20% of tax on all earnings above $49,232 — $1,684, on the $5,768 of taxable income.
If the GIC is held in a registered account, different rules apply. If held in a TFSA, the interest earned is tax-free. If held in an RESP, RDSP or RRSP, the interest earned is taxed when funds are withdrawn from the registered account — and, only at the marginal tax rate at the time of withdrawal. In most situations, the marginal tax rate is lower when money is withdrawn from these tax-efficient registered accounts, meaning less tax is paid on the interest earned.
How to invest in a GIC
It’s easy to invest in a GIC through a bank or another financial institution. You can apply online or in person. Just be sure to check the minimum deposit requirements (usually $500 for registered and $1,000 for unregistered. Here’s what you need to do to find a GIC that suits your financial needs.
Choose between short-term GIC or long-term GIC
The GIC term is the length of time you commit to investing your money in the GIC. GIC terms range from one month to 10 years.
Short-term GICs have terms of less than one year. This makes ideal if you know you’ll need access to your money soon, but you still want to earn more interest than if you park the money in a savings account. Given the higher flexibility, short-term GICs usually come with lower interest rates. For instance, in 2023, 6-month GIC rates for non-registered products hovered between 2% and 4%.
Long-term GICs offer investment periods between 1-year and 10-years. These GICs offer higher interest rates.
A good hedge between short-term and long-term GICs are redeemable or cashable GICs. Your money will still be invested for a specified period of time, and you get access to higher rates, but the flexibility and option of cashing-in before the end of the term.
In 2023, 1-year GIC rates in Canada ranged between 3% to 5.15%, while the best 5-year GIC rates typically fell between 4.5% and 4.7%.
Minimum deposit requirement for GICs
If you want to invest in a GIC, you’ll need to make sure you can meet minimum deposit requirements. The minimum investment amount varies depending on the bank or financial institution offering the GIC and whether or not the GIC is held in a registered account, or not.
As a general guide, most GICs require a deposit of $500 or more. However, minimum limits may be higher or lower. For example, EQ Bank GICs and Simplii GICs accept a minimum deposit of $100, while a Manulife short-term GIC requires a minimum investment of $25,000.
Other terms and conditions may also apply. For example, if you want to receive monthly interest payments from a Scotiabank GIC, you’ll need to invest at least $5,000.
Where to buy a GIC?
In most cases, you can invest in a GIC by going online, over the phone or by visiting a branch.
However, you’re not limited to the big five banks (also know as the big six banks) when buying GICs. Almost all financial institutions now offer GICs, so it’s worth comparing a range of options to find the best GIC rates in Canada.
To start, go to the bank where you already hold a bank account or registered investment account. Then check out the GIC rates offered by online banks. Quite often, you will find better GIC rates at online banks and other alternative financial institutions, so shop around.
Credit unions also offer a wide range of GIC terms and rates. Credit unions will require a small membership fee — between $5 and $15 — and you may need to comply with eligibility requirements, such as living in the province where the credit union is located.
One final option is to compare GIC options using a registered investment broker. Known as Registered Deposit Brokers, these investment professionals can help you find the best GIC rates and terms.
How does a GIC ladder work?
GIC laddering is an investment strategy designed to help you maximize the interest you earn, but without locking all your funds away in a single long-term GIC. The basic approach is to split the money you want to invest into five equal portions, then invest in five separate GICs with staggered maturity dates.
For example, let’s say you have $10,000 to invest. Split that up into five separate $2,000 portions, each of which can be invested in a GIC with terms ranging from 1-year to 5-years. As each GIC matures, you can reinvest the principal plus interest into a new 5-year GIC, and repeat.
This allows you to maximize your returns thanks to the higher interest rates offered by long-term GICs. At the same time, you also have the flexibility of being able to access a portion of your total investment (if needed) as it matures each year.
Alternatives to GICs
Not sure whether a GIC is the right fit for your investment goals? You may want to consider some of the following alternatives.
GIC vs TFSA
A Tax-Free Savings Account (TFSA) can hold many different types of investments, including cash, stocks, bonds and even GICs. This flexibility allows you to build a diversified portfolio of investments that can potentially deliver higher returns than a GIC. The interest you earn on your TFSA investments is also tax-free, and you also get the flexibility of being able to access the cash in your account at any time.
However, TFSAs have contribution limits. While these contributions limits can change from year-to-year, the current cap is set at $6,500 per year.
Dive deeper: Tax-free savings accounts
GIC vs mutual funds
Mutual funds are a higher-risk alternative to GICs, but they also offer the potential for higher rewards. The performance of a mutual fund is linked to the aggregate performance of a package of securities (typically stocks and bonds) in the market. This means that your return will vary based on how well your mutual fund performs as a whole.
A mutual fund has the potential to comfortably outperform the return from a GIC. At the same time, if the stock market crashes or your mutual fund performs poorly, you could lose money, including your principal investment.
Mutual funds are more flexible than non-redeemable GICs because you can cash in your investment at any time without incurring a penalty. Your investment is also managed by a professional fund manager, but you’ll need to pay annual management fees as a result.
You can invest in a mutual fund through an online stock trading platform.
GIC vs term deposits
GICs and term deposits are both secured investments. This means that the investor is guaranteed to get their investment funds back at the end of the investment period (known as a term), in addition to any interest accrued on the balance held in the investment products. The key difference between a GIC and a term deposit is the length of time your money is locked into the investment. Term deposits are usually short-term, lasting nine months or less, while GICs are longer, lasting one year or more.
In the recent Finder: Consumer Sentiment Survey Q2 2023, 11.46% of respondents considered GICs and term deposits as a good investment product given the current economic climate — slightly less than the 14.14% of respondents who considered GICs and term deposits to be safe investments in the Finder: Consumer Sentiment Survey Q1 2023. confidence in cash and liquid assets did drop, from 7.74% in January 2023, to 4.97% in April 2023.
GIC vs bonds
Bonds allow you to earn a fixed rate of interest and return your principal once they reach maturity. The interest rate you’ll get varies based on whether the bond is corporate, municipal or federal.
Bonds can be cashed in or traded at any time, so they’re more flexible than GICs. But their returns may be lower than what you can get with a GIC, and they’re also not covered by CDIC insurance. So if the bond issuer gets into financial difficulty, they may not be able to pay back your principal or interest.
GIC vs savings accounts
A high interest savings account pays compound interest to help you reach your savings goals. The best accounts offer competitive rates and no monthly fees, and many accounts won’t penalize you for dipping into your savings. This makes a high interest savings account well worth considering if you want your money to work harder for you, but you need the flexibility to access your balance when needed.
The downside is that savings accounts offer lower interest rates than GICs. So if you’ve got a long-term savings goal in mind, a GIC may be a better choice.
Bottom line
A GIC is a safe and secure way to help grow your wealth. Investing in GICs is a low-risk approach and can form an important part of a diversified investment strategy. However, it’s important to compare a range of options to find the best GIC rates in Canada. GIC interest rates vary depending on the financial institution you choose and the term of your investment, so shop around to find the best GIC for your needs.
Survey Methodology – Finder: Consumer Sentiment Survey Q1 2023
The results of the Finder: Consumer Sentiment Survey Q1 were collected through an online Pollfish survey conducted between December 2022 and January 2023. In the survey, 1,846 Canadians from across the country were asked about their current banking services and their intentions and motivations for new banking products. The estimated margin of error for the survey is +/- 3%, with a 99% confidence level.
Survey Methodology – Finder: Consumer Sentiment Survey Q2 2023
The results of the Finder: Consumer Sentiment Survey Q1 were collected through an online Pollfish survey conducted between December 2022 and January 2023. In the survey, 1,011 Canadians from across the country were asked about their current banking services and their intentions and motivations for new banking products. The estimated margin of error for the survey is +/- 3.08%, 19 out of 20 times.
Guaranteed investment certificates (GICs) FAQs
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