What is a GIC?<\/strong><\/h2>\n\n\n\nGICs are a type of investment product. In exchange for depositing your money into a financial institution for a fixed period of time, GICs earn a guaranteed rate of interest. <\/p>\n\n\n\n
GICs are often referred to as term deposits<\/a> because your money is tied up for a certain period, ranging from 30-days, as with short-term GICs<\/a> \u2014 to 10 years, with long-term GICs<\/a>. <\/p>\n\n\n\nThough GIC returns typically aren\u2019t enough to make it your primary investment vehicle, GICs can seem extra attractive when interest rates and economic instability are both increasing. <\/p>\n\n\n\n
Because most GIC products assure moderate to high rates of returns, it has been one of the safest and popular investment options among Canadians for decades. <\/p>\n\n\n\n
In a rising interest rate environment, a bank or credit union<\/a> is likely to pay you a higher interest rate if you\u2019re willing to let them keep your money for a longer period. For example, a three-year GIC may offer a higher interest rate than a one-year GIC term.<\/p>\n\n\n\nHow does a GIC work?<\/strong><\/h2>\n\n\n\nWhen you buy a GIC, you\u2019re essentially creating a contract with a financial institution. Along with other conditions, this contract includes: <\/p>\n\n\n\n
\n- Investment amount:<\/strong> an amount equal to the minimum deposit determined by the bank or higher based on your preference.<\/li>\n\n\n\n
- Interest rate:<\/strong> a set amount that you will be paid once the term of the contract is over, monthly or annually as per the payment option you choose.<\/li>\n\n\n\n
- Length of the term:<\/strong> an agreed period that can range from a few months to several years during which you\u2019ll typically have no access to your funds.
For example, let\u2019s say you deposit $1,000 in a one-year GIC that is available with a 2% interest rate. You\u2019d earn $20 at the end of the year. That means you\u2019d have $1,020 when the term is over.<\/li>\n\n\n\n- Date of maturity:<\/strong> the point at which interest payments stop and your investment is due. You may choose to reinvest or withdraw your funds by instructing the bank ahead of time. <\/li>\n<\/ul>\n\n\n\n
Note, if you fail to provide instructions to your bank, even after receiving a reminder, the bank could automatically reinvest your funds at the end date. However, you get 10 business days to cancel the new term.<\/p>\n\n\n\n
Unless otherwise stated, GICs are generally non-redeemable<\/a>. To get the full benefit of a GIC, your money must remain invested for the entire length of the contract. And if you were to withdraw your funds sooner, it would end up costing you a penalty. That said, some GICs are cashable or redeemable<\/a>, but they typically come with a lower interest rate. <\/p>\n\n\n\nBesides redeemability, you can choose from other kinds of GIC options to support your periodic savings goals.<\/p>\n\n\n
\n\n\t\n\t\n\t\t\n\t\t\t\n\t\t\t\t\n\t\t\t\tBest GIC & Term Deposit Rates in Canada<\/h5>\n\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\tCompare all different GIC rates side-by-side and find out the best rate that will meet your need \t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t
Explore Now<\/a><\/div>\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\t![\"Ad](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/03\/piggy-bank-1-e1648676303661.jpeg\")
\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\nTypes of GICs<\/h3>\n\n\n\n
Understanding how different types of GICs work will help you determine which ones might be the best fit for your portfolio.<\/p>\n\n\n\n
Fixed-rate GICs<\/h4>\n\n\n\n
When people talk about GICs, they\u2019re usually referring to fixed-rate products. These types of GICs are easy to understand since they pay a fixed amount of interest based on the length of the contract and the amount you deposit. <\/p>\n\n\n\n
For example, if you were to invest $10,000 into a one-year GIC with an interest rate of 3.50%, you\u2019d have $10,350 when the term is up.<\/p>\n\n\n\n
Variable-rate GICs<\/h4>\n\n\n\n
Variable-rate GICs have interest rates that can fluctuate during the term. This can benefit you when interest rates are rising<\/a>, as they did for much of 2023, but it works against you if rates drop.<\/p>\n\n\n\nThe variable rate of interest paid on these GICs is determined by the issuing financial institution\u2019s prime rate<\/a>, and can change at any time based on the market performance.<\/p>\n\n\n\nThough, your principal is still guaranteed, so you can\u2019t actually lose money.<\/p>\n\n\n\n
Market-linked GICs<\/h4>\n\n\n\n
Market-linked GICs<\/a> give you a return based on the performance of the stock market. If markets go up, so does your rate of return. If markets drop, your returns sink, but your principal is still protected.<\/p>\n\n\n\nRegistered GICs<\/h4>\n\n\n\n
A registered GIC<\/a> is held in an account registered with the Canadian federal government and allows you to grow your savings tax-free, such as a registered retirement savings plan<\/a> or a tax-free savings account<\/a>. You won\u2019t pay taxes on any interest you earn on your GIC while it\u2019s in one of these accounts, but you’ll have to be mindful of any age or contribution limits.<\/p>\n\n\n\nNon-Registered GICs<\/h4>\n\n\n\n
A non-registered GIC is a GIC that isn’t held in a registered account. Since they’re not regulated by the government, they don’t come with any tax breaks or incentives. However, you won\u2019t have to worry about age or contribution limits when investing in a non-registered GIC.<\/p>\n\n\n\n
Foreign Exchange GICs<\/h4>\n\n\n\n
Foreign exchange GICs, such as U.S. dollar GICs, allow you to earn interest on foreign currency.<\/p>\n\n\n\n
Are GICs insured?<\/h3>\n\n\n\n
GICs purchased through member banks of the Canadian Deposit Insurance Corporation (CDIC)<\/a> are insured up to $100,000. <\/p>\n\n\n\nTerm deposits purchased from a credit union or caisse populaire<\/a>, are covered by a corporation within your province or territory of residence. For example, residents of Ontario who purchase a GIC via a credit union would be covered up to $250,000 thanks to the Financial Services Regulatory Authority (FSRA) of Ontario\u2019s Deposit Insurance Reserve Fund (DIRF).<\/p>\n\n\n\nGIC pros and cons<\/h2>\n\n\n\n
GICs can be an ideal product for someone with a short investment timeline and a low risk tolerance. But you should consider the main benefits and drawbacks that may impact your individual goals before investing.<\/p>\n\n\n\n
Advantages of GICs<\/strong><\/h4>- The principal investment is secure and can be cashed in full at the end of the GIC term.<\/li>
- Calculating return on fixed-rate GICs is relatively straightforward as it\u2019s based on the length of the term and the amount deposited.<\/li>
- You often receive a higher rate of return on GICs when interest rates are on the rise.<\/li>
- You\u2019re not taxed on the interest earned within a registered GIC.<\/li><\/ul>
Disadvantages of GICs<\/strong><\/h4>- There\u2019s usually a minimum amount required to invest in a GIC. For example, $500 or $1,000.<\/li>
- You\u2019ll need to lock your money for the entire term if you want to get the full return.<\/li>
- The interest rate offered on GICs may not beat inflation.<\/li>
- You\u2019ll be taxed on the interest earned if the GIC is held outside of a registered account.<\/li><\/ul><\/div>\n\n\n\n
How to buy a GIC<\/strong><\/h2>\n\n\n\nIf you already have an account with a bank or credit union that offers online banking<\/a>, you can usually purchase a GIC with just a few clicks. <\/p>\n\n\n\nIf you want to buy a GIC from a financial institution you don\u2019t bank with, you’ll first have to call an advisor or visit a branch to open a new account<\/a>. When opening any new bank account, you may need to provide: <\/p>\n\n\n\n\n- Your personal information, including email and home address.<\/li>\n\n\n\n
- Two pieces of valid government-issued IDs, such as your passport and driver\u2019s licence.<\/li>\n\n\n\n
- Your Social Insurance Number (SIN)<\/a>.<\/li>\n<\/ul>\n\n\n\n
Before you add funds to your GIC, you\u2019ll need to decide the type of account you want to hold your GIC in, such as:<\/p>\n\n\n\n
\n- Tax-free savings accounts (TFSAs)<\/a>.<\/li>\n\n\n\n
- Registered retirement savings plans (RRSPs)<\/a>.<\/li>\n\n\n\n
- Registered retirement income funds (RRIFs)<\/a>.<\/li>\n\n\n\n
- Locked-in retirement accounts (LIRAs)<\/a>.<\/li>\n\n\n\n
- Non-registered accounts.<\/li>\n<\/ul>\n\n\n\n
When you purchase GICs in a tax-friendly account, you won\u2019t have to give a portion of your returns to the Canada Revenue Agency. If you hold your GICs in a non-registered, taxable account, all interest earned is fully taxable \u2014 but the portfolio still benefits from the added security of fixed-income investments<\/a>. <\/p>\n\n\n\nIf you\u2019re a prospective international student<\/a>, learn more about the qualifying requirements for the Student Direct Stream (SDS)<\/a> program before buying a GIC.<\/p>\n\n\n\n\n\t\n\t\t\n\t\t\tAbout the Authors\t\t<\/h4>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\tSiddhi Bagwe is a content management specialist at NerdWallet Canada. Treating content marketing as an educational medium for readers, Siddhi believes in empowering them with the knowledge of personal finance…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Siddhi Bagwe and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\tClay Jarvis is NerdWallet\u2019s mortgage and real estate expert in Canada. Thus far, his entire professional writing career has revolved around real estate. Prior to joining NerdWallet, he was the…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Clay Jarvis and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t\n\t\t\t\t\t\n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t\n\t\t\t\n\n\t\n\t\t\t\n\t\t![\"Registered](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/07\/Registered-vs.-Non-Registered-GICs-e1627513600478-460x191.jpg\")
\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tRegistered vs. Non-Registered GICs\t<\/a>\n<\/h4>\n\n\t\n\t\tThe main difference between registered and non-registered GICs is that registered GICs are held in investment accounts that receive special tax privileges.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\t![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/03\/IMG_20220329_114424-150x150.jpg\")
Clay Jarvis<\/a>![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/03\/Headshot_Siddhi-Jahagirdar-e1648746969870-40x40.jpg\")
Siddhi Bagwe<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t![\"Compare](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/06\/best-gics-canada-e1656103928840-460x191.jpg\")
\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tCompare GIC Rates in Canada for 2025: Best 1- to 5-Year GICs\t<\/a>\n<\/h4>\n\n\t\n\t\tThe best GIC rates offer a safe, secure way to grow your money over a set term.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\tSiddhi Bagwe<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t![\"GIC](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/05\/GettyImages-1295681463-e1652996732321-460x198.jpg\")
\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tGIC Ladder: A Clever Way to Maximize Your Investment\t<\/a>\n<\/h4>\n\n\t\n\t\tA GIC ladder staggers the maturity dates of your guaranteed investment certificates so you can take advantage of longer-term interest rates. <\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\tSiddhi Bagwe<\/a>Clay Jarvis<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t![\"GICs](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1091434226-e1650391906542-460x198.jpg\")
\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tGICs vs. Mutual Funds: How to Choose\t<\/a>\n<\/h4>\n\n\t\n\t\tGICs and mutual funds differ in terms of potential risk and reward. But access to your money, the fees involved and the potential tax implications should also be considered when choosing between them.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\tClay Jarvis<\/a>![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/07\/Hannah-Logan-e1626212867388-40x40.jpg\")
Hannah Logan<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\t\t<\/div>\n\t<\/section>\n\n","protected":false},"excerpt":{"rendered":"A GIC is a low-risk investment product that guarantees your initial deposit while earning a fixed or variable rate of return, which is typically paid at the end of the term. <\/p>\n","protected":false},"author":4,"featured_media":1346,"parent":100,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"page-templates\/article-sidebar.php","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_is_hidden":false,"apple_news_is_paid":false,"apple_news_is_preview":false,"apple_news_is_sponsored":false,"apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"middle","apple_news_slug":"","apple_news_sections":"[]","apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":"","_nw_pros_cons_block_schema":"{\"@context\":\"http:\/\/schema.org\",\"@type\":\"Product\",\"name\":\"Guaranteed Investment Certificate: What a GIC Is and How It Works\",\"review\":{\"@type\":\"Review\",\"name\":\"Guaranteed Investment Certificate: What a GIC Is and How It Works\",\"author\":{\"@type\":\"Person\",\"name\":\"Post Author\"},\"positiveNotes\":{\"@type\":\"ItemList\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"The principal investment is secure and can be cashed in full at the end of the GIC term.\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Calculating return on fixed-rate GICs is relatively straightforward as it\u2019s based on the length of the term and the amount deposited.\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"You often receive a higher rate of return on GICs when interest rates are on the rise.\"},{\"@type\":\"ListItem\",\"position\":4,\"name\":\"You\u2019re not taxed on the interest earned within a registered GIC.\"}]},\"negativeNotes\":{\"@type\":\"ItemList\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"There\u2019s usually a minimum amount required to invest in a GIC. For example, $500 or $1,000.\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"You\u2019ll need to lock your money for the entire term if you want to get the full return.\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"The interest rate offered on GICs may not beat inflation.\"},{\"@type\":\"ListItem\",\"position\":4,\"name\":\"You\u2019ll be taxed on the interest earned if the GIC is held outside of a registered account.\"}]}}}"},"content-classification":[15],"topic":[106],"cluster":[210],"pp_author":[307,87],"acf":[],"apple_news_notices":[],"yoast_head":"\n
What Is a GIC? Guaranteed Investment Certificates - NerdWallet Canada<\/title>\n<meta name=\"description\" content=\"A Guaranteed Investment Certificate (GIC) is a low-risk, fixed-income investment with guaranteed returns. Interest rates vary by type.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.nerdwallet.com\/ca\/banking\/what-is-a-gic\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What Is a GIC? Guaranteed Investment Certificates - NerdWallet Canada\" \/>\n<meta property=\"og:description\" content=\"A Guaranteed Investment Certificate (GIC) is a low-risk, fixed-income investment with guaranteed returns. 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Interest rates vary by type.","og_url":"https:\/\/www.nerdwallet.com\/ca\/banking\/what-is-a-gic","og_site_name":"NerdWallet Canada","article_publisher":"https:\/\/www.facebook.com\/NerdWallet","article_modified_time":"2024-04-30T16:10:52+00:00","og_image":[{"width":2119,"height":879,"url":"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/07\/What-Is-a-GIC-and-How-Does-It-Work--e1627422077392.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_site":"@NerdWallet","twitter_misc":{"Est. reading time":"6 minutes","Written by":"Siddhi Bagwe, Clay Jarvis"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.nerdwallet.com\/ca\/banking\/what-is-a-gic","url":"https:\/\/www.nerdwallet.com\/ca\/banking\/what-is-a-gic","name":"What Is a GIC? Guaranteed Investment Certificates - NerdWallet Canada","isPartOf":{"@id":"https:\/\/www.nerdwallet.com\/ca\/#website"},"datePublished":"2021-07-27T21:50:31+00:00","dateModified":"2024-04-30T16:10:52+00:00","description":"A Guaranteed Investment Certificate (GIC) is a low-risk, fixed-income investment with guaranteed returns. Interest rates vary by type.","breadcrumb":{"@id":"https:\/\/www.nerdwallet.com\/ca\/banking\/what-is-a-gic#breadcrumb"},"inLanguage":"en-CA","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.nerdwallet.com\/ca\/banking\/what-is-a-gic"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.nerdwallet.com\/ca\/banking\/what-is-a-gic#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.nerdwallet.com\/ca\/"},{"@type":"ListItem","position":2,"name":"Banking","item":"https:\/\/www.nerdwallet.com\/ca\/banking"},{"@type":"ListItem","position":3,"name":"Guaranteed Investment Certificate: What a GIC Is and How It Works"}]},{"@type":"WebSite","@id":"https:\/\/www.nerdwallet.com\/ca\/#website","url":"https:\/\/www.nerdwallet.com\/ca\/","name":"NerdWallet Canada","description":"NerdWallet, make all the right money moves.","publisher":{"@id":"https:\/\/www.nerdwallet.com\/ca\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.nerdwallet.com\/ca\/?s={search_term_string}&submit=Search"},"query-input":"required name=search_term_string"}],"inLanguage":"en-CA"},{"@type":"Organization","@id":"https:\/\/www.nerdwallet.com\/ca\/#organization","name":"NerdWallet Canada","url":"https:\/\/www.nerdwallet.com\/ca\/","logo":{"@type":"ImageObject","inLanguage":"en-CA","@id":"https:\/\/www.nerdwallet.com\/ca\/#\/schema\/logo\/image\/","url":"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/06\/NerdWallet-bug.svg","contentUrl":"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/06\/NerdWallet-bug.svg","width":1,"height":1,"caption":"NerdWallet Canada"},"image":{"@id":"https:\/\/www.nerdwallet.com\/ca\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/NerdWallet","https:\/\/twitter.com\/NerdWallet","https:\/\/www.instagram.com\/NerdWallet"]}]}},"_links":{"self":[{"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/pages\/1345"}],"collection":[{"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/comments?post=1345"}],"version-history":[{"count":53,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/pages\/1345\/revisions"}],"predecessor-version":[{"id":64429,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/pages\/1345\/revisions\/64429"}],"up":[{"embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/pages\/100"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/media\/1346"}],"wp:attachment":[{"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/media?parent=1345"}],"wp:term":[{"taxonomy":"content-classification","embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/content-classification?post=1345"},{"taxonomy":"topic","embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/topic?post=1345"},{"taxonomy":"cluster","embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/cluster?post=1345"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.nerdwallet.com\/ca\/wp-json\/wp\/v2\/pp_author?post=1345"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
Though GIC returns typically aren\u2019t enough to make it your primary investment vehicle, GICs can seem extra attractive when interest rates and economic instability are both increasing. <\/p>\n\n\n\n
Because most GIC products assure moderate to high rates of returns, it has been one of the safest and popular investment options among Canadians for decades. <\/p>\n\n\n\n
In a rising interest rate environment, a bank or credit union<\/a> is likely to pay you a higher interest rate if you\u2019re willing to let them keep your money for a longer period. For example, a three-year GIC may offer a higher interest rate than a one-year GIC term.<\/p>\n\n\n\n When you buy a GIC, you\u2019re essentially creating a contract with a financial institution. Along with other conditions, this contract includes: <\/p>\n\n\n\n Note, if you fail to provide instructions to your bank, even after receiving a reminder, the bank could automatically reinvest your funds at the end date. However, you get 10 business days to cancel the new term.<\/p>\n\n\n\n Unless otherwise stated, GICs are generally non-redeemable<\/a>. To get the full benefit of a GIC, your money must remain invested for the entire length of the contract. And if you were to withdraw your funds sooner, it would end up costing you a penalty. That said, some GICs are cashable or redeemable<\/a>, but they typically come with a lower interest rate. <\/p>\n\n\n\n Besides redeemability, you can choose from other kinds of GIC options to support your periodic savings goals.<\/p>\n\n\n \n\t\t\t\t\t\tCompare all different GIC rates side-by-side and find out the best rate that will meet your need \t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t Understanding how different types of GICs work will help you determine which ones might be the best fit for your portfolio.<\/p>\n\n\n\n When people talk about GICs, they\u2019re usually referring to fixed-rate products. These types of GICs are easy to understand since they pay a fixed amount of interest based on the length of the contract and the amount you deposit. <\/p>\n\n\n\n For example, if you were to invest $10,000 into a one-year GIC with an interest rate of 3.50%, you\u2019d have $10,350 when the term is up.<\/p>\n\n\n\n Variable-rate GICs have interest rates that can fluctuate during the term. This can benefit you when interest rates are rising<\/a>, as they did for much of 2023, but it works against you if rates drop.<\/p>\n\n\n\n The variable rate of interest paid on these GICs is determined by the issuing financial institution\u2019s prime rate<\/a>, and can change at any time based on the market performance.<\/p>\n\n\n\n Though, your principal is still guaranteed, so you can\u2019t actually lose money.<\/p>\n\n\n\n Market-linked GICs<\/a> give you a return based on the performance of the stock market. If markets go up, so does your rate of return. If markets drop, your returns sink, but your principal is still protected.<\/p>\n\n\n\n A registered GIC<\/a> is held in an account registered with the Canadian federal government and allows you to grow your savings tax-free, such as a registered retirement savings plan<\/a> or a tax-free savings account<\/a>. You won\u2019t pay taxes on any interest you earn on your GIC while it\u2019s in one of these accounts, but you’ll have to be mindful of any age or contribution limits.<\/p>\n\n\n\n A non-registered GIC is a GIC that isn’t held in a registered account. Since they’re not regulated by the government, they don’t come with any tax breaks or incentives. However, you won\u2019t have to worry about age or contribution limits when investing in a non-registered GIC.<\/p>\n\n\n\n Foreign exchange GICs, such as U.S. dollar GICs, allow you to earn interest on foreign currency.<\/p>\n\n\n\n GICs purchased through member banks of the Canadian Deposit Insurance Corporation (CDIC)<\/a> are insured up to $100,000. <\/p>\n\n\n\n Term deposits purchased from a credit union or caisse populaire<\/a>, are covered by a corporation within your province or territory of residence. For example, residents of Ontario who purchase a GIC via a credit union would be covered up to $250,000 thanks to the Financial Services Regulatory Authority (FSRA) of Ontario\u2019s Deposit Insurance Reserve Fund (DIRF).<\/p>\n\n\n\n GICs can be an ideal product for someone with a short investment timeline and a low risk tolerance. But you should consider the main benefits and drawbacks that may impact your individual goals before investing.<\/p>\n\n\n\n If you already have an account with a bank or credit union that offers online banking<\/a>, you can usually purchase a GIC with just a few clicks. <\/p>\n\n\n\n If you want to buy a GIC from a financial institution you don\u2019t bank with, you’ll first have to call an advisor or visit a branch to open a new account<\/a>. When opening any new bank account, you may need to provide: <\/p>\n\n\n\n Before you add funds to your GIC, you\u2019ll need to decide the type of account you want to hold your GIC in, such as:<\/p>\n\n\n\n When you purchase GICs in a tax-friendly account, you won\u2019t have to give a portion of your returns to the Canada Revenue Agency. If you hold your GICs in a non-registered, taxable account, all interest earned is fully taxable \u2014 but the portfolio still benefits from the added security of fixed-income investments<\/a>. <\/p>\n\n\n\n If you\u2019re a prospective international student<\/a>, learn more about the qualifying requirements for the Student Direct Stream (SDS)<\/a> program before buying a GIC.<\/p>\n\n\n\n Siddhi Bagwe is a content management specialist at NerdWallet Canada. Treating content marketing as an educational medium for readers, Siddhi believes in empowering them with the knowledge of personal finance…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Siddhi Bagwe and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t Clay Jarvis is NerdWallet\u2019s mortgage and real estate expert in Canada. Thus far, his entire professional writing career has revolved around real estate. Prior to joining NerdWallet, he was the…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Clay Jarvis and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t The main difference between registered and non-registered GICs is that registered GICs are held in investment accounts that receive special tax privileges.<\/p>\n\t<\/div>\n\n\t The best GIC rates offer a safe, secure way to grow your money over a set term.<\/p>\n\t<\/div>\n\n\t A GIC ladder staggers the maturity dates of your guaranteed investment certificates so you can take advantage of longer-term interest rates. <\/p>\n\t<\/div>\n\n\t GICs and mutual funds differ in terms of potential risk and reward. But access to your money, the fees involved and the potential tax implications should also be considered when choosing between them.<\/p>\n\t<\/div>\n\n\t A GIC is a low-risk investment product that guarantees your initial deposit while earning a fixed or variable rate of return, which is typically paid at the end of the term. <\/p>\n","protected":false},"author":4,"featured_media":1346,"parent":100,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"page-templates\/article-sidebar.php","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_is_hidden":false,"apple_news_is_paid":false,"apple_news_is_preview":false,"apple_news_is_sponsored":false,"apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"middle","apple_news_slug":"","apple_news_sections":"[]","apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":"","_nw_pros_cons_block_schema":"{\"@context\":\"http:\/\/schema.org\",\"@type\":\"Product\",\"name\":\"Guaranteed Investment Certificate: What a GIC Is and How It Works\",\"review\":{\"@type\":\"Review\",\"name\":\"Guaranteed Investment Certificate: What a GIC Is and How It Works\",\"author\":{\"@type\":\"Person\",\"name\":\"Post Author\"},\"positiveNotes\":{\"@type\":\"ItemList\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"The principal investment is secure and can be cashed in full at the end of the GIC term.\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Calculating return on fixed-rate GICs is relatively straightforward as it\u2019s based on the length of the term and the amount deposited.\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"You often receive a higher rate of return on GICs when interest rates are on the rise.\"},{\"@type\":\"ListItem\",\"position\":4,\"name\":\"You\u2019re not taxed on the interest earned within a registered GIC.\"}]},\"negativeNotes\":{\"@type\":\"ItemList\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"There\u2019s usually a minimum amount required to invest in a GIC. For example, $500 or $1,000.\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"You\u2019ll need to lock your money for the entire term if you want to get the full return.\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"The interest rate offered on GICs may not beat inflation.\"},{\"@type\":\"ListItem\",\"position\":4,\"name\":\"You\u2019ll be taxed on the interest earned if the GIC is held outside of a registered account.\"}]}}}"},"content-classification":[15],"topic":[106],"cluster":[210],"pp_author":[307,87],"acf":[],"apple_news_notices":[],"yoast_head":"\nHow does a GIC work?<\/strong><\/h2>\n\n\n\n
\n
For example, let\u2019s say you deposit $1,000 in a one-year GIC that is available with a 2% interest rate. You\u2019d earn $20 at the end of the year. That means you\u2019d have $1,020 when the term is over.<\/li>\n\n\n\nBest GIC & Term Deposit Rates in Canada<\/h5>\n\t\t\t\t\t\t\t\t\t
\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\nTypes of GICs<\/h3>\n\n\n\n
Fixed-rate GICs<\/h4>\n\n\n\n
Variable-rate GICs<\/h4>\n\n\n\n
Market-linked GICs<\/h4>\n\n\n\n
Registered GICs<\/h4>\n\n\n\n
Non-Registered GICs<\/h4>\n\n\n\n
Foreign Exchange GICs<\/h4>\n\n\n\n
Are GICs insured?<\/h3>\n\n\n\n
GIC pros and cons<\/h2>\n\n\n\n
Advantages of GICs<\/strong><\/h4>
Disadvantages of GICs<\/strong><\/h4>
How to buy a GIC<\/strong><\/h2>\n\n\n\n
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\n\t\t\tAbout the Authors\t\t<\/h4>\n\n\t\t\t\t\t
\n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t
\t<\/a>\n\t\t\t\n\t\n\t\tRegistered vs. Non-Registered GICs\t<\/a>\n<\/h4>\n\n\t
Clay Jarvis<\/a>Siddhi Bagwe<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\t<\/a>\n\t\t\t\n\t\n\t\tCompare GIC Rates in Canada for 2025: Best 1- to 5-Year GICs\t<\/a>\n<\/h4>\n\n\t
Siddhi Bagwe<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\t<\/a>\n\t\t\t\n\t\n\t\tGIC Ladder: A Clever Way to Maximize Your Investment\t<\/a>\n<\/h4>\n\n\t
Siddhi Bagwe<\/a>Clay Jarvis<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\t<\/a>\n\t\t\t\n\t\n\t\tGICs vs. Mutual Funds: How to Choose\t<\/a>\n<\/h4>\n\n\t
Clay Jarvis<\/a>Hannah Logan<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\t\t<\/div>\n\t<\/section>\n\n","protected":false},"excerpt":{"rendered":"