A Guaranteed Investment Certificate (GIC) in Canada is a low-risk investment offered by banks, credit unions, and other financial institutions. With a GIC, you deposit a fixed amount of money for a set period (known as the term) and earn interest on your deposit. GICs are popular among Canadian investors who prioritize safety and guaranteed returns.

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Key Features of a GIC:

• Guaranteed Principal and Interest:

  • The money you invest (principal) is fully protected, and you are guaranteed to receive it back at the end of the term.

  • Interest rates may be fixed or variable, depending on the type of GIC.

• Fixed Term Lengths:

  • Terms typically range from 30 days to 10 years.

  • Longer terms usually offer higher interest rates.

• Interest Payment Options:

  • Interest can be paid periodically (e.g., monthly, annually) or at the end of the term.

• Low Risk:

  • GICs are considered one of the safest investment options because they are insured by the Canada Deposit Insurance Corporation (CDIC) (up to $100,000 per eligible account, per institution).

• Accessibility:

  • Some GICs are non-redeemable, meaning you cannot access your funds until the term ends. Others are redeemable or cashable, allowing early withdrawal, usually with a lower interest rate.

 

1. Fixed-Rate GICs

 

These GICs offer a guaranteed interest rate for the term of the investment.

    •    The interest rate is fixed at the time of purchase.

    •    Suitable for investors seeking stability and predictable returns.

 

2. Variable-Rate GICs

 

These GICs offer an interest rate that fluctuates based on a benchmark, such as the prime rate.

    •    Your return depends on interest rate changes during the term.

    •    May offer higher returns when interest rates are rising.

 

3. Cashable or Redeemable GICs

 

These GICs allow you to withdraw your money before the maturity date.

    •    Often have lower interest rates compared to non-redeemable GICs.

    •    Offer flexibility for investors who may need early access to their funds.

 

4. Non-Redeemable GICs

 

These GICs lock your funds for the entire term, and early withdrawal is typically not allowed.

    •    Offer higher interest rates compared to redeemable GICs.

    •    Best for investors who can commit to leaving their money untouched until maturity.

 

5. Market-Linked or Equity-Linked GICs

 

These GICs tie their returns to the performance of a stock market index or a group of stocks.

    •    Offer the potential for higher returns than fixed-rate GICs.

    •    Your principal is guaranteed, but returns are not.

 

6. Registered GICs

 

These GICs are held within registered accounts, such as:

    •    Registered Retirement Savings Plan (RRSP): Contributions grow tax-deferred until withdrawal.

    •    Tax-Free Savings Account (TFSA): Returns are earned tax-free, including interest.

    •    Registered Education Savings Plan (RESP): Helps save for a child’s education with potential government grants.

    •    Registered Retirement Income Fund (RRIF): Provides retirement income with tax-deferred growth.

 

7. U.S. Dollar (USD) GICs

 

These GICs are denominated in U.S. dollars instead of Canadian dollars.

    •    Useful for investors who want to hold U.S. currency.

    •    Protects against exchange rate fluctuations.

 

8. Laddered GICs

 

This strategy involves dividing your investment into multiple GICs with staggered maturity dates.

    •    Helps balance higher returns and liquidity.

    •    Reduces reinvestment risk by spreading maturity dates over time.

 

Each type of GIC has its own advantages, depending on your investment goals, time horizon, and need for flexibility. Before purchasing, compare terms and rates across financial institutions to find the best option for your situation.

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In Canada, Guaranteed Investment Certificates (GICs) can be purchased from a variety of financial institutions, both online and in-person. Here’s where you can buy GICs:

 

1. Banks

 

Most major Canadian banks offer GICs with a range of terms and interest rates.

    •    Royal Bank of Canada (RBC)

    •    TD Canada Trust

    •    Scotiabank

    •    Bank of Montreal (BMO)

    •    Canadian Imperial Bank of Commerce (CIBC)

    •    National Bank of Canada

 

2. Credit Unions

 

Credit unions often provide competitive rates and personalized service for GICs.

    •    Vancity

    •    Coast Capital Savings

    •    Meridian Credit Union

    •    Desjardins

 

3. Online-Only Banks

 

Digital banks and financial institutions usually offer higher GIC rates due to lower operating costs.

    •    EQ Bank

    •    Tangerine (owned by Scotiabank)

    •    Simplii Financial (owned by CIBC)

    •    Motive Financial

 

4. Investment Firms and Brokers

 

You can purchase GICs through investment platforms or brokers, which may provide access to GICs from multiple issuers.

    •    Questrade

    •    Wealthsimple

    •    BMO InvestorLine

    •    RBC Direct Investing

 

5. Insurance Companies

 

Some insurance companies offer GIC-like products, such as annuities or segregated funds with guaranteed returns.

    •    Manulife

    •    Sun Life Financial

 

6. Financial Advisors

 

Financial advisors can help you compare GIC rates from different institutions and find options that suit your investment goals.

 

How to Choose the Best GIC Provider

1. Compare Interest Rates: Check rates offered by banks, credit unions, and online platforms.

2. Consider Term Length: Look for terms that align with your savings goals.

3. Check CDIC Coverage: Ensure the institution is covered by the Canada Deposit Insurance Corporation (CDIC) for protection of your investment (up to $100,000 per issuer, per account type).

4. Redeemability Options: Decide whether you need a redeemable or non-redeemable GIC based on your liquidity needs.

5. Additional Features: Some providers offer bonuses, laddered GICs, or market-linked GICs for higher potential returns.

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Where to Start Comparing Rates

 

Websites like Ratehub  allow you to compare GIC rates across various institutions in Canada.