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What is a GIC?

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A guaranteed investment certificate (GIC) is an investment product that guarantees you a specified rate of return for lending a bank or similar institution your money for a specific period of time. It works the same way as a loan, except that the lending institution pays you interest.

GICs are also like a savings account, except that in exchange for a higher interest rate on your deposit, you agree to leave the money in place and not withdraw it. If you cash out early, you may have to pay a penalty or lose some of what you earned.

The longer the term of a GIC, the higher the interest rate you earn. It is called a Guaranteed Income Certificate because, unlike other securities, it offers a guaranteed principal, meaning your principal (the amount you initially put in) is never at risk. With most GICs, you also receive a guaranteed return on your investment.

A GIC is a safe and secure investment with minimal risk attached to it. However, these types of investments tend to have historically lower rates of return than other higher-risk equity investments. This is especially true when general interest rates are lower.

Types of GICs

GICs offer varying terms. GIC terms can be as little as 30 days or as long as 10 years. The institution where you buy your GIC can pay you interest on a monthly, semi-annual, or annual basis or reinvest the interest on your behalf until the maturity date.

Non-redeemable GICs will not allow you to access your funds until the end of the term. If you think you will need the cash, look for a cashable or redeemable GIC. Cashable GICs often have a one-year term and can be cashed at any time after a short waiting period of 60-90 days without penalty. Redeemable GICs are often held for longer than one year and can be cashed at any time, although there is often an early redemption fee.

GICs also come in various forms, including fixed income investments and others tied to the stock market.

Fixed rate GICs

Fixed-rate GICs offer a predetermined interest rate. The upside of a fixed rate GIC is that you are guaranteed a specific and predictable rate of return. The downside is you are not protected against inflation. For example, if you buy a $1000 GIC at a fixed rate of 2%, you will earn $20. If the inflation rate hits 4%, you will have $1020, but your original $1000 will be worth $40 less. You have effectively lost $20 in real value.

Variable-rate GICs

Variable-rate GICs are tied to the bank’s prime rate. If the prime rate rises, your rate of return rises too. If they drop, however, your rate of return will as well.

Equity-linked GICs

Equity-linked GICs link to a stock market index. You will not know your rate of return until they reach maturity. If the stock market performs well over the term of your GIC, you could receive a reasonable rate of return. However, if the stock market underperforms, you could see nothing other than the return of your original principal.

Escalating rate GICs

Escalating rate GICs pay you increasing interest rates over the term of the investment. For example, with a three-year term GIC, you receive a higher rate in year two and an even higher rate in year three. The idea is to incentivize you to keep your money invested in the GIC and not take it out early.

US and foreign currency GICs

You can hedge your investment against currency fluctuations by investing in the US or foreign currency GIC. This is a good idea if you think that the Canadian dollar may lose value compared to other currencies.

Insurance GICs

Many insurance companies offer these GICs, otherwise known as accumulation annuities. These types of GICs allow you to name a beneficiary. The CIDC does not insure them, and they have slightly different terms and conditions.

Registered GICs

GICs can be held in Registered Education Savings Plans (RESP), Registered Retirement Savings Accounts (RRSP), and Tax-Free Savings Accounts (TFSA). This is a tax-friendly investment, as the tax-free status of a registered account also offers protection for the returns on your GIC.

Why invest in a GIC?

GICs are excellent low-risk investments. They make sense for people with shorter investment horizons and those who cannot afford to risk their principal. That’s why they are generally good choices for registered accounts such as RESPs and RRSPs, particularly if people will soon need these funds for significant events or purchases such as weddings, trips, automobiles, or even appliances. Or to send a child to school or retire.

GICs are also great to help save money for a long or short-term goal. Unlike savings accounts, GIC rates are guaranteed, and there are incentives to leave your money in the GIC. In theory, you are more likely to keep saving.

How and where to buy a GIC

You can buy GICs in person, by phone, or online, directly through most financial institutions, including banks and trust companies. Independent deposit brokers or online discount brokerages also sell GICs. You will need to set up an account, sign forms and arrange a deposit to pay for the GIC.

The best GIC rates

Rates for GICs vary widely depending on the seller and the terms. Cashable or redeemable GICs tend to have lower rates than non-redeemable GICs. Longer terms or escalating GICs offer higher rates than short-term GICs. Credit unions often provide some of the best rates, but many of those are not covered by CIDC insurance. Be sure to ask about terms & conditions as well as insurance.

Here is a short list of some of the best registered, CDIC insured GIC rates in Canada:

Financial Institution Interest Term Type Minimum Investment
Equitable Bank 4.75% 1 Year Registered $100
Tangerine 4.70% 1 Year Registered $1
Oaken Financial 5.05% 1 Year Registered $1000
CIBC 4.25% 1 Year Registered $500
TD Bank 3.00% 1 Year Registered $500
Bank of Montreal 4.00% 1 Year Registered $1000

Pros and cons of a GIC 


  • Low risk

  • Good return (GICs currently offer between 1-3% interest)

  • Easy to manage

  • No fees for purchasing and cashing

  • Insured investment (if purchased through a major institution such as the Canada Deposit Insurance Corporation (CIDC)

  • Protection from volatility (if you opt for a fixed interest rate GIC)

  • Minimal initial investment (you can buy a GIC for as little as $100)


  • Less Liquidity

  • Lower overall returns

  • No protection from inflation

  • Reduced after-tax return (unless held in registered accounts)

What are insured GICs?

If you purchase a GIC through a major institution, it is insured for up to $100,000 by the Canada Deposit Insurance Corporation (CIDC). Certain GIC deposits made with credit unions and Caisse Populaires are insured by Provinces. This means that if something happens to the bank, your deposit is still protected. These include:

  • Term deposits with an original maturity term of seven years or less
  • Index or market-linked GICs if the principal is fully repayable at maturity

However, foreign currency GICs, those with terms longer than seven years or sold by a financial institution that is not a member of the CIDC and/ or provincial deposit insurance, are not insured.

Our final thoughts

Take time to compare rates and terms before you buy. Understand your own needs first. What are you saving for, and when are you likely going to need access to the cash? Can you foresee any emergencies where you may need the money sooner? These questions can help you determine the term and type of GIC you buy and get you the best return on your investment while still ensuring your money is available to you when you need it.

GICs are safe, secure investments that allow you to earn a competitive rate of return on your investment. Investing in other securities can offer a much higher rate of return. However, GICs are still an excellent choice for risk-averse investors and short-term investors or those seeking to balance risk in their investment portfolios.

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