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Best GIC rates in Canada
A guaranteed investment certificate (GIC) is one of the safest ways to grow your money. Find out who has the best GIC rates in Canada.
For millions of Canadians, a guaranteed investment certificate (GIC) is the safest way to invest for the future without losing money. Our guide below looks at the best GIC rates in Canada.
Like other fixed-income securities, GICs guarantee a consistent and predictable return on investment through fixed interest rate payments over time. How much interest you’re entitled to receive varies based on three criteria: term, issuer and whether you select a variable rate or fixed rate GIC.
What are GIC terms?
GIC terms are the length of time you’ll park your money in the fund. Periods range from 30 days to 10 years. In general, the longer you invest, the higher the interest rate you’re entitled to receive (in the case of fixed GICs).
This type of investment is further broken down into non-redeemable GICs and redeemable GICs. A non-redeemable GIC is when you invest a certain amount of money for a set length of time in exchange for a fixed interest rate at the end of the term. When the term expires, you can either cash in your GIC or renew your term and keep investing.
A redeemable GIC operates in much the same way, but it lets you withdraw your funds at any time. Your principal is always guaranteed, but you may be required to pay a redemption fee.
What are GIC issuers?
When you invest in a GIC, you are giving your money to a financial institution for a specific period of time. The financial institution is the “issuer” of the GIC. In Canada, most GIC issuers are banks, though some are credit unions.
Variable rate vs fixed rate GICs
GICs are meant to be low-risk investments that offer guaranteed interest rates, but not all of them operate in this way. When you decide to invest in this asset class, you’ll have the option of selecting a fixed rate or variable rate GIC.
A fixed rate GIC guarantees you a set interest rate for the duration of your term. On the other hand, a variable rate will fluctuate according to how well the stock or bond markets are performing. So, while you have the opportunity to earn higher interest with a variable GIC, you can’t predict how much interest (if any) you’ll get back.
Best GIC rates in Canada
Most GICs with the highest interest rates usually have a term of five years or more. Below is a summary of the best fixed rate GIC rates in Canada for a 5-year term.
|Oaken Financial 5-year Long-Term GIC||2.9%||5 years|
|TD 5-year Stepper GIC||1.85%||5 years|
|Meridian Credit Union Raise the Rate GIC||1.45%||5 years|
|EQ Bank 5 Year GIC||1.8%||5 years|
|Tangerine 5-Year GIC||2.2%||5 years|
|BMO GIC||2%||5 years|
|Scotiabank Long Term Non-Redeemable GICs||0.8%||5 years|
Choosing the right GIC investment
Whether you’re investing short term or have a longer time horizon, GICs offer predictable interest payments without compromising your principal investment. The exact combination of term, issuer and interest rates depends on your unique circumstances and risk tolerance as well as on the best deals available.
Investors who are more risk averse and want to take advantage of guaranteed interest payments will likely find fixed rate GICs more attractive. Combined with a laddering approach, where you invest in various terms and re-invest the new amount after each term expires, fixed rate GICs can offer you significant earnings over time.
GICs are available in registered accounts, such in a Registered Retirement Savings Plan GIC (RRSP GIC) and a Tax-Free Savings Account GIC (TFSA GIC), which allow you to grow your investments free of any tax penalties. These accounts have annual contribution limits, so it’s important to plan ahead. Non-registered GICs do not have contribution limits, but they are taxable at the end of each year.
Investors with a higher risk tolerance may consider variable rate options, which are linked to the equity and bond markets. Since rates are not fixed, they can offer higher returns. On the flip side, they offer no guarantees that you’ll get back more than you put into the GIC.
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