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Published September 14, 2023
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GIC vs. HISA: How to Choose

HISAs and GICs are both low-risk financial tools, but have important differences in interest rates, access to your cash and more.

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High-interest savings accounts (HISAs) and guaranteed investment certificates (GICs) are reliable financial tools that can help boost your ability to save. GICs have higher interest rates but typically lock up your funds for months or years, whereas HISAs offer lower rates but much more accessibility. 

What are GICs and HISAs?

A GIC is a low-risk investment product offered by banks and other financial institutions in Canada. You earn a fixed or variable rate of interest over the term of your GIC, which can range from a month to 10 years. A GIC is considered low risk because the institution you buy it from guarantees that, when your GIC matures, you’ll get your original investment back, as well as any earned interest. GICs can be held in unregistered or registered accounts, like a tax-free savings account (TFSA) or a registered retirement savings plan (RRSP).  

A high-interest savings account, sometimes called a HISA, is a type of bank account that offers a higher interest rate than a regular savings account. How much higher depends on the financial institution, and online-only alternative banks tend to offer much higher rates than Canada’s Big Six banks. A HISA can be a dependable and easy way to accelerate your savings.

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Understanding high-interest savings accounts and GICs

HISAs and GICs have some crucial differences, and understanding these distinctions can help you make an informed choice when deciding if one or both should be part of your financial toolkit. But first, let’s take a closer look at each option.

How do HISAs and GICs work?

A high-interest savings account is a kind of bank account. Its distinguishing feature is that it offers a higher rate of interest than a regular savings account. You can use it exactly as you would a regular savings account, making deposits, withdrawals and bill payments (though there could be a fee for certain kinds of transactions, depending on your bank). 

GICs, on the other hand, are investments in which you deposit your money for a set period of time. A GIC is not an account, so you typically can’t keep making deposits during the term, and you can’t withdraw your money until your term is up. However, cashable GICs let you take your money out early, and laddered GICs let you access some cash at defined periods).

Types of GICs

There are four main types of GICs: 

  • Cashable. You can cash out your GIC after a set period of time without paying a penalty fee.
  • Redeemable. Secure a guaranteed interest rate while retaining the option to partially or completely withdraw your investment before the end of the term.
  • Non-redeemable. Lock in your money for a set term and enjoy higher interest rates. 
  • Market-linked. Protect your principal while trying out an investment linked to the performance of financial markets, such as the S&P 500.

Within the above four categories, you can find other subcategories of GICs like short- or long-term GICs, U.S. dollar GICs, and escalating-, fixed- or variable-rate GICs. Note that not all banks offer all these options.

Types of HISAs

Individual financial institutions give their high-interest savings accounts all kinds of different names, but generally there are two types: registered and unregistered. 

A registered account is an account registered with the federal government that features unique tax incentives, such as a RRSP or TFSA. For example, you can open a HISA account within your TFSA, so any interest you earn would not be taxed. A non-registered HISA would not have any taxation benefits. Some banks also offer registered and non-registered HISAs that are U.S. dollar or joint accounts. 

GICs vs. high-interest savings accounts

Similarities:

  • Savings vehicles. Both high-interest savings accounts and GICs are financial products designed to help people save money.
  • Risk level. HISAs and GICs are generally considered low-risk savings options because your principal deposit is protected.
  • Types. Both types of savings vehicles can be registered or unregistered.

Differences:

  • Nature of investment. HISAs are savings accounts and you can make withdrawals and deposits as needed (though there may be fees, depending on your account). GICs are fixed-term investments, not bank accounts.
  • Interest rates. GICs typically offer higher interest rates than HISAs in exchange for locking your money in for a set period of time. 
  • Term. GICs have fixed terms ranging from 30 days to 10 years. HISAs are bank accounts, so they don’t have a fixed term and instead offer ongoing, flexible access to your funds.

What should you consider before choosing between a HISA and GIC?

The choice between the two depends on your financial goals and whether you need ready access to your money. Your decision should align with whether you prioritize predictable returns and can lock in your funds for a few months or years (meaning a GIC would be a good choice), or prefer accessibility and solid interest rates without a fixed term commitment (making a HISA the best option). 

Where and how to get a HISA or GIC 

You can get a HISA or GIC from most banks, credit unions or alternative financial institutions in Canada. Typically, you can buy a GIC online if you are already a customer of the bank, and otherwise you may have to call or visit a branch to open an account. 

For a HISA, depending on the institution, you may be able to open an account online or visit a brick-and-mortar location.


Frequently asked questions about GICs and HISAs

Is a GIC better than a high-interest savings account?

Whether a GIC is better than a high-interest savings account depends on numerous factors, such as your financial goals and need for liquidity.

If you want a good interest rate but also want quick and easy access to your cash, then a HISA is likely a better choice. If you are comfortable with locking in your money for a period of time to benefit from higher interest rates, a GIC may be your top bet.

Are my HISA and GIC deposits insured by the CDIC?

GICs and high-interest savings accounts are both protected by the Canada Deposit Insurance Corporation (CDIC) up to $100,000.

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