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To build wealth, it often takes a little more than just putting a part of your paycheque in a savings account every month. If you make your money work for you, investing is something you may want to seriously consider.
But if you haven’t got a big appetite for risk, you may want to look into an investment vehicle that offers the opportunity to earn interest on your investment without exposing you to too much risk, and GICs fit the bill.
A GIC stands for a Guaranteed Investment Certificate. Also referred to as “term deposits,” GICs offer a safe way for people to invest their money with no risk. Even if your investment does not end up being fruitful, you will still be able to get your initial investment funds back. But because this type of investment is so low-risk, the returns may not be as high as they may be with riskier investments.
GICs work somewhat like high-interest savings accounts in that a high-interest rate is typically affixed to the deposit. However, a GIC and a regular savings account differ in terms of how easily accessible the deposited funds are.
Once you have invested in a GIC, the money is meant to stay put until the term expires. If you withdraw the money early, you could be faced with a penalty fee or may have to forfeit the interest earned, depending on the type of GIC account you take out. With a savings account, on the other hand, you are free to withdraw funds as needed.
Generally speaking, the longer the term, the higher the rate of return. That’s what makes long-term GIC investments so attractive, especially for those who can part with their capital for a longer period of time.
You can set up a GIC much like you would any other bank account. You’ll be required to make a minimum deposit, which will vary depending on the bank and the GIC. Deposits can be as low as $500 or as high as a few thousand dollars. Deposits up to $100,000 are insured by the Canada Deposit Insurance Corporation (CDIC), as long as the funds stay in the account for 5 years.
The principal amount deposited in your GIC will be guaranteed to earn interest as stipulated in the contract. You’ll be required to leave that investment amount in your GIC account for a certain amount of time, during which you’ll be guaranteed to earn interest on the principal amount stipulated in your contract.
There are various types of GICs, which can influence the exact interest rate offered:
Fixed-rate GICs are the most well-known type of GIC and come with a rate that remains fixed over the entire term. A specific amount of interest will be payable at certain periods throughout the term.
In contrast, a variable-rate GIC comes with a rate that can change throughout the term and is dependent on a changing interest rate benchmark. If the rate increases throughout your term, you’ll make more money, while a decreasing rate means you’ll earn less.
GIC terms range in length. Shorter terms can be as short as 30 days to a year, while longer terms can be as long as 5 to 10 years. Generally speaking, the interest rate is higher on longer-term GICs.
Registered GICs include accounts like RRSPs, RESPs, and TFSAs that allow your savings to grow tax-free. On the other hand, non-registered GICs are independent investments and are taxed, which means you will lose a small amount of interest earned.
With redeemable GICs, you can cash in your proceeds any time after you buy them without being subject to a waiting period. However, you will be subject to early redemption rates. Non-redeemable GICs come with more stringent terms for redemption, which means you can’t withdraw funds until the investment matures.
Market-linked GICs are tied to the stock market. These types of GICs are a type of hybrid investment product that are part GIC and part stock market investment. Your investment’s performance will depend on how the stock market performs throughout the term of your GIC. Your initial investment deposit is guaranteed, and you have the potential to earn higher returns given the way the stock market behaves.
Foreign currency GICs involve investing in currencies other than Canadian dollars. These types of GICs can help you protect your money from fluctuations in the Canadian dollar. If it’s likely that the Canadian dollar will lose value compared to other currencies in the near future, a foreign currency can help you protect your capital from this devaluation.
There are a handful of features that you may want to learn about to help you get familiar with GICs:
The money you deposit into a GIC will need to remain in the account for a certain amount of time as specified in the contract, which is known as the “term.” GIC terms can be as short as 30 days to as long as 10 years. Once your money has been deposited, it should remain in the account to earn the interest rate promised and stipulated in the contract.
If you choose a 3-year term, for instance, the funds must remain in the GIC for 3 years until the term expires. The longer the term, the longer your money will need to sit in the account. That’s why you should take the time to make sure you’re comfortable with not having access to that money for the term length since it won’t be as easily accessible as it would be in a regular savings account.
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The interest rate is what will allow your money to grow as it sits in the GIC. The higher the rate, the faster your money will grow. The interest rate is a crucial feature to consider before you take out a GIC.
Interest earned on the deposited amount is usually paid on an annual basis or at maturity. The interest payments can be added to the balance of the GIC so that the money can build even faster until the term expires. Otherwise, you may have the option to use these payments as a passive income by paying out the interest into another account.
In general, shorter terms usually have lower interest rates, while longer terms typically have higher rates.
As noted earlier, you will usually have to wait until the GIC’s maturity date before you can withdraw the funds in the account. After the term expires, you can access the original principal amount, plus interest earned. But if you withdraw early, you will likely have to forfeit any interest earned and/or pay an early withdrawal fee.
However, you may be able to withdraw funds from your GIC account earlier with a cashable GIC. Since there are different types of GIC accounts available, you should find out more about early cashouts with your GIC if there is a chance that you may need to access the money prior to the end of the term.
If you bought your GIC at a major Canadian bank or credit union, your GIC will be insured by the CDIC or another insurance company. That means you will get all your money back if the bank goes under or cannot pay you when your GIC matures. The coverage you receive is based on the value and type of GIC you buy.
Each province also has its own insurance offerings for community banks. For example, an Ontario-based credit union may be insured by a province-based insurance company that will guarantee GICs.
There are no fees or commissions charged for GICs. When you buy a GIC, you’ll have the benefit of earning the promised interest with no deductions. That said, you could lose some of the interest accrued on your GIC if you cash out early on a non-redeemable GIC. Also, you may be on the hook for paying a transfer-out fee if you transfer your GIC to another financial institution.
There are a handful of reasons why you may want to consider adding a GIC to your investment portfolio, including the following:
GIC rates are based on the type and term. We’ve listed the best GIC rates based on short-term and long-term GICs with various banks.
Rate | Min Investment | GIC Type | |
Oaken Financial | 1.65% | $1,000 | Non-registered |
Tangerine | 0.95% | None | Registered |
TD | 0.45% | $1,000 | Registered and non-registered |
CIBC | 0.68% | $500 | Cashable, escalating rate |
Motive Financial | 1.50% | $1,000 | Non-redeemable |
MAXA Financial | 1.70% | $500 | Registered |
EQ Bank | 3.45%* | $100 | Non-registered |
Scotiabank | 0.6% | $500 | Non-registered |
*Interest is paid monthly and calculated daily on the total closing balance. Rates are subject to change without notice.
Rate | Min Investment | GIC Type | |
Oaken Financial | 2.10% | $1,000 | Non-registered |
Tangerine | 1.25% | None | Registered |
TD | 3.55% | $1,000 | Registered and non-registered Stepper GIC |
CIBC | 2.65% | $1,000 | Escalating rate |
Motive Financial | 2.00% | $1,000 | Non-redeemable |
MAXA Financial | 2.10% | $500 | Registered |
EQ Bank | 4.20%* | $100 | Non-registered |
Scotiabank | 1.1% | $500 | Non-registered |
*Interest is paid monthly and calculated daily on the total closing balance. Rates are subject to change without notice.
Oaken Financial is an online bank in Canada that offers GICs, as well as high-interest savings accounts. While the bank is predominantly online there are a handful of physical branches in major cities across Canada. The online bank is insured by the CDIC, so eligible funds are safe and secure.
Oaken Financial offers both short-term and long-term GICs, both for registered (RSP, RIF, TFSA) and non-registered plans. Right now, Oaken’s GIC rates range from 1.50% to 2.10%, depending on whether they are short- or long-term and based on the exact term length.
One of the more well-known online-only banks in Canada is Tangerine, once named ING Direct and now an arm of Scotiabank. Holding funds in a Tangerine account – including GICs – means your money will be protected by the CDIC.
While Tangerine may be well-known for its no-fee chequing account, it also offers GICs at competitive rates with no fees or service charges. Currently, Tangerine’s GIC rates range from 0.5% for a 90-day GIC to 1.25% for a 5-year term.
Learn MoreTD Bank is one of Canada’s larger banks and offers a myriad of banking products to Canadians. TD’s GIC offerings are vast, making it easy to choose one that best suits your needs. Terms range from anywhere between 90 days to as long as 5 years and come with terms as high as 3.55%.
Right now, TD’s Special Offer GICs include a 100-day term with up to 0.30% in interest earned and an 18-month term with up to 0.75% in interest earned. TD Canadian Banking & Utilities GIC is another featured GIC that comes with a 3-year term and interest up to 12.00%.
CIBC is one of Canada’s biggest banks and has branches, ATMs and corporate offices all over the country. It’s widely regarded as one of the more trusted names in banking in Canada with over 11 million clients, and offers everything from personal, to business, to commercial banking, to wealth management products.
Like TD Bank, CIBC offers a wide range of GICs, both for registered and non-registered accounts, with terms that range from as little as 30 days up to 5 years. Currently, CIBCs featured GICs include the Bonus Rate and EasyBuilder LIF GICs, both of which are non-registered and offer rates as high as 1.150% for longer terms.
Motive Financial is an online-only bank that offers many of the conventional banking products that traditional big banks offer, including chequing, savings, RRSP, TFSA, and GIC accounts. The bank offers clients a sense of security thanks to its affiliation with CDIC that insures up to $100,000 in deposits per customer. Motive Financial offers competitive rates on its GICs, which range from 1.50% to 2.0% for terms from 12 months to 5 years.
Learn MoreMAXA Financial is an online bank and is a subsidiary of Manitoba-based Westoba Credit Union, which is a member of the Deposit Guarantee Corporation of Manitoba (DGCM). Canadians with a MAXA account can do their banking via mobile apps downloaded for iOS and Android devices, as well as through online banking.
The digital bank offers some of the most competitive rates for its high-interest savings account and GIC products for RRSP, TFSA, and RRIF accounts. Right now, rates for MAXA’s GICs range from 1.70% to 2.10% for terms ranging from 1 year to 5 years.
EQ Bank is one of the newer online banks in Canada, though its parent company is Equitable Bank, a large Canadian financial institution that’s been around since the 1970s and is insured by the CDIC. Deposits up to $100,000 are insured as a result. EQ Bank is known for its high-interest savings and GIC accounts, which offer clients a way to earn a guaranteed interest rate on deposits.
EQ Bank’s GIC rates are one of the highest in the country. Right now, the bank’s GIC rates range from 1.60%* to 4.25%* for terms as short as 3 months and as long as 10 years. With these guaranteed high rates, saving for the future becomes easier. Plus, the minimum amount needed to invest is just $100, making EQ Bank’s GICs very accessible.
Learn MoreScotiabank is another large, well-known Canadian bank that offers a plethora of banking products, including GICs. What makes Scotiabank unique and stands out from other big banks is its blend of various products typical of a large bank with innovative digital aspects that makes banking more accessible and cost-effective.
Right now, Scotiabank’s GIC offer includes a 0.90% rate on a 9-month term, 1.00% on a 15-month term, 1.01% on an 18-month term, and 1.21% on a 21-month term. The first three are redeemable, and therefore may be cashed in at any time, while the last is non-redeemable.
Interest | Minimum Deposit | GIC Term | |
RBC Non-Redeemable GIC | 0.70% | $1,000 | 3 years |
CIBC Cashable Escalating Rate GIC Non-registered | 2.00% | $500 to $99,999 | 5 years |
Tangerine Non-registered (GIC) | 1.20% | – | 5 years |
BMO GIC Non-registered | 1.4% | $1,000 | 10 years |
TD non-registered GIC | 0.85% | $1,000 | 5 years |
Simpli Financial Registered GIC | 1.20% | $100 | 5 years |
EQ Bank high interest GIC | 4.25%* | $100 | 10 years |
*Interest is paid monthly and calculated daily on the total closing balance. Rates are subject to change without notice.
Long-term GICs come in terms of 1 to 10 years. There are a few reasons why a long-term GIC may be worth considering:
Interest | Minimum Deposit | GIC Term | |
Scotiabank | 0.20% | $5,000 | 30 days |
BMO Cashable 90 Day GIC | 0.40% | $5,000 | 90 days |
EQ Bank High Interest 90 Day GIC | 1.60%* | $100 | 90 days |
HSBC 90 Day GIC | 0.95% | $5,000 | 90 days |
Tangerine USD 90 Day GIC | 1.00% | $0 | 90 days |
Tangerine 180 Day GIC | 2.25% | $0 | 180 days |
Oaken Financial | 1.40% | $1,000 | 1 year |
*Interest is paid monthly and calculated daily on the total closing balance. Rates are subject to change without notice.
Short-term GICs come with terms that usually range from 30 days to 364 days. There are plenty of perks that come with investing in a short-term GIC:
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There are plenty of places to buy a GIC, and each financial institution offers its own rates and types of GICs. Do some comparison shopping before you buy a GIC to make sure the product you purchase best suits your needs while providing you with the fastest way to grow your money.
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