If you’re looking for an intelligent way to grow your savings, consider a Guaranteed Investment Certificate (GIC).
GICs are one of the safe investments with high returns in Canada, ideal for investors with low to high-risk profiles.
Investing in a guaranteed investment certificate is one way to lock in a historically low-interest rate while protecting your cash if interest rates drop further.
So, how do you know the best GIC rate in Canada? It’s not just the one with the highest interest rate.
Many other factors determine the best rate: term, type of investment, and risk tolerance.
That’s why we have done all the hard work to help you see through all the pitches to find the best GIC rates in Canada.
This article covers everything you need to know about the best GIC rates in Canada to help you make informed financial decisions.
What is a GIC?
A Guaranteed Investment Certificate (GIC) is a time deposit that guarantees you an interest rate for a specific period.
It is an investment product issued by a bank or credit union and held at the financial institution.
These investments give you a guaranteed interest rate and get a safe place to park your cash while you decide what to do with it.
The combination of guaranteed interest and flexible terms make guaranteed investment certificates ideal for investing idle funds.
When you pick a fixed-rate GIC, you know what you’re getting: your rate is guaranteed until the end of the term, and your money grows for a set amount of time.
The GIC’s income potential makes it great for long-term savings goals, like buying a car or paying for an education.
When you lock into a guaranteed rate, you’ll never have to worry about rising interest rates; your savings are guaranteed to grow at the same rate as your term.
The Pros and Cons of a GIC
A Guaranteed Investment Certificate (GIC) is a great investment choice–but it’s not suitable for everyone.
Like most things in life, there are pros and cons to GICs (Guaranteed Investment Certificates).
Here is a brief overview of the pros and cons of GICs to help you make an informed decision:
- Since GICs aren’t redeemable, your savings will be locked in, and you will be forced to let them grow.
- As you know what you’re getting back at the start, your return won’t decrease during the term as rates are usually guaranteed.
- The CDIC or its equivalent protects deposits, so you know that at the very least, you’ll get your deposit back if things go wrong.
- Even though cashable GICs allow early withdrawals, their rate tends to be lower than non-cashable GICs.
- You won’t see a lot of returns with a GIC, as it is a low-risk option
- If something urgently arises and you need your money right away, you may be hit with a penalty for early withdrawals or may not be able to receive it at all
- Currently, you can get more liquidity by using GICs as they have lower interest rates than high-interest saving accounts.
What are the Types of GICs?
There are several different kinds of GICs with their unique features. Let’s look at the common types and see how they work:
Redeemable GICs are investment products that can be redeemed before the maturity date. This can provide you with temporary cash flow relief and means a loss of interest income.
However, you may have to pay an early redemption penalty or other fees for redeeming your product.
These products offer low-interest rates, relatively short terms, and no additional features. Many investors use redeemable GICs for short-term financial planning purposes.
A non-redeemable GIC is a guaranteed investment contract (GIC) that cannot be redeemed before the end of the term without receiving a penalty as outlined in the agreement.
This type of GIC increases in value over time. It is best suited to investors with a longer investment time frame looking to maximize security and return on their investment at maturity.
Therefore, if you want the security of a GIC but want to cash in your investment before it matures, you should select a redeemable GIC instead.
Cashable GICs are one of the most popular forms of Guaranteed Investment Contracts.
They are usually available for terms as short as one year and are free to cash out after 30 to 90 days. You can also earn a lower return than what a regular GIC offers.
Cashable GICs also offer added flexibility – they are more liquid than other GICs because they can be withdrawn before the term is up without penalty.
A registered GIC is an investment with greater growth potential than a fixed-term deposit account. It lets you earn tax-free interest.
This type of GIC is beneficial when you earn interest income while remaining in a registered account such as an RRSP or TFSA.
However, depending on the type of account you choose, there are annual limits to the amount you can put into these accounts.
In this case, GICs are not held in a registered account. Some people prefer to leave their investments outside of a registered plan.
This can sometimes make sense, but keep in mind that the income paid on these GICs is taxable.
However, non-registered GICs offer flexibility, competitive interest rates, and no limits on the amount of money you can invest. You can choose any dollar amount that works for your needs with no maximum investment limits.
Foreign Currency GICs
These are GICs that are not in Canadian dollars and are often in US dollars. They are ideal for anyone who travels or frequently works outside Canada and wants to even out their currency exposure.
Foreign currency GICs are a simple and affordable way to invest in foreign currency. You can earn an interest rate on the Canadian dollar equivalent of your investment.
However, you should remember that you may lose your gains if the institution fails since foreign currency GICs are not CDIC-insured.
With a Foreign Currency GIC, you can shield your money from exchange rate fluctuations for a set period, helping to protect against market risk if the currency drops in value.
In this GIC, the performance is determined by a specific market, and it guarantees only your principal deposit.
Market-Linked GICs provide you with a guaranteed return linked to the performance of a financial index. If the performance of a specified market falls below the minimum return, your deposit will be returned.
This combination of a GIC and a stock market investment may appeal to investors looking for greater rewards with a tremendous amount of risk.
The Best GIC Rates in Canada
Canada is home to some of the best GIC rates. If you’re looking for flexible options that can help you save while earning interest, one of these consistently high-paying GICs could be the right choice for you.
Each financial institution has a different GIC rate in Canada. Here are the current best GIC/term deposit rates in Canada:
1. Oaken Financial
Launched in 2013, Oaken Financial is Home Trust’s direct banking division. It has a few brick-and-mortar offices in Canada, although virtually all operations are online.
Oaken is one of the new online banks sprouting up across Canada to cater to those seeking better interest rates and lower fees instead of in-person interactions.
Because Oaken is relatively new to the marketplace, it may concern some investors, but the interest rates are attractive for those willing to take on the risk, and CDIC insures Oaken’s GICs.
It has a $1,000 minimum deposit requirement and pays interest annually.
Learn more here.
2. ICICI Bank Canada
ICICI Bank Canada offers one the best GIC rates in Canada with a wide range of options and flexible terms.
Whether you’re interested in a short-term investment or something long-term, you’ll appreciate the varied term options and highly competitive rates available when you open an account with them.
Additionally, ICICI offers foreign currency GICs, ideal for those investing in a currency other than Canadian dollars.
Open a GIC account with ICICI Bank Canada and enjoy some of the best interest rates in the country, no matter what term you choose.
Learn more here.
3. People’s Trust
This is a subsidiary of People’s Group and is based in Vancouver, B.C. They’ve been around since 1985 but don’t have big-name recognition yet.
This company is Canada’s leading independent investment dealer, offering a broad range of investment options to suit our customers’ needs. CDIC also insures them.
People’s Trust has consistently been one of the best GIC providers in Canada. With People’s Trust and their exclusive trust company status, you’ll find that your GIC can sport the best interest rates in Canada.
Learn more here.
4. Wyth Financial
There’s a reason why Canadians come to Wyth for all of their banking needs. They have one of the most competitive rates in Canada.
Whether you’re saving for a car or a vacation, Wyth offers competitive, simple products to help you get there faster.”
They are backed by the Canada Deposit Insurance Corporation (CDIC) and allow you to build your savings without the risk of losing capital.
With features like secure online account opening, easy-to-understand compound interest, and friendly customer service, you can focus on what matters: saving up for your goals.
Learn more here.
5. LBC Digital (Laurentian Bank)
Find the best GIC rates in Canada with LBC Digital and Laurentian Bank. With no monthly account fees and flexible ways to access your money, you can easily make the most of your savings.
With over 160 years of experience helping Canadians build a solid financial future, LBC Digital is available to help make saving simpler.
LBC Digital offers one of the best GIC rates in Canada. Regardless of which account you choose, you can always benefit from interest rates consistently amongst the industry’s highest, no minimum balances, and more.
Whether you’re looking for the best GIC rates in Canada or simply want to take advantage of some extra savings opportunities, LBC Digital provides a secure way to access all your banking needs.
Learn more here.
How are GIC Rates Calculated?
GICs have different payment terms depending on the issuer and the product. GICs can pay interest on a monthly, six-month, yearly, or predetermined/anniversary basis.
Along with the payout schedule, you should learn how compound interest works on the GIC you’re considering. Banks pay interest only on initial principal with simple interest.
For example, if you invested $200,000 into a two-year GIC with a 1.25% interest rate, you would get $2,500 every year in interest. Consequently, the interest payout will be $5,000 at the end of year two.
The bank pays interest on both the original principle and the interest gained at each interval using compound interest.
There is no doubt that compound interest pays the most, but be careful about the payout schedule.
The above example shows an annual payment, but you’d earn even more at the end of the two years if it were compounded monthly.
Note, however, that if you sign the GIC contract, you agree to the principal and interest payment schedule terms.
Therefore, those terms and conditions cannot be changed once you’ve agreed to them. Reviewing the payout terms is crucial as they will determine whether or not you will earn interest.
How Can I Purchase a GIC?
A GIC can be obtained from a bank or another provider. However, before contacting a GIC issuer, you must determine how much you wish to invest.
After that, determine whether you want a variable or fixed rate and decide how accessible and flexible the funds are.
After you have identified your needs, contact the provider and financial institution of your choice to get started with the process.
Below are the ways to purchase a GIC in Canada:
The financial institution either requires an existing account or demands that you submit an application and documentation proving your identity, including your Social Insurance Number.
The principal investment is withdrawn, and a GIC is issued once the account is created and linked to your primary funding source.
Alternatively, you can purchase a GIC in a branch. If you have already established a profile with the financial institution, the process is more straightforward.
Otherwise, you will need to set up an appointment with pieces of identification, including your SIN, fill out an application, and follow the institution’s process for funding and issuing a GIC.
You can do your research through deposit brokerages, who know the best available options.
Furthermore, they are well aware of insurance protections, so you can rest assured your investment is covered in case of the issuer’s bankruptcy.
Also, with their network of multiple banks, you can pick and choose the option that suits your needs.
Final Thoughts on the Best GIC/Term Deposit Rates in Canada
GICs are one of the most popular forms of investment in Canada. GICs are low-risk, high-yield investments.
When it comes to protecting your savings, GICs are tough to beat. However, choosing the best GIC rate in Canada can be tricky and confusing, especially if you do not know what to look for.
Thankfully, now you know the best GIC rates in Canada and how to purchase a GIC that suits your situation.
Give your savings a head start with Canada’s best guaranteed investment certificate rates.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
The primary purpose of Money Reverie is to help everyday Canadians make better financial decisions by providing up-to-date financial news and information, reports, product reviews, and government programs.