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Guaranteed Investment Certificates — also known as GICs for short — are an easy and reliable way to earn a predetermined amount of interest on your hard-earned savings.
GICs work similarly to high-interest savings accounts in that you earn a percentage of interest for any money that you have stashed away. However, the benefit of GICs is that you are guaranteed to receive a certain amount of interest at the end of an agreed-upon term. That’s why they’re “guaranteed”! To get the most out of your investment, you must shop around for the best GIC rates on the market.
In this article, we will share an overview of the best GIC rates in Canada so that you can rest assured that you are placing your money in the best (and most profitable) hands possible. We’ll also touch base on what a GIC is, how it works, and the different types available
Many great GIC rates available in Canada do not come from traditional banks. In fact, most of Canada’s best GIC rates are available from independent banks or credit unions. Here are Canada’s best GIC rates, from three independent banks.
EQ Bank is an online bank owned by Equitable Bank, Canada’s 9th largest independent bank.
EQ Bank currently offers a handful of products. Primary products are its Savings Plus account and GICs, which provide some of the best rates currently available in Canada.
EQ Bank GICs are available as registered and non-registered investments, with terms ranging from 3 months up to 10 years in length.
GIC rates from EQ Bank range from 2.65%* to 4.75%*.
Oaken Financial is an online bank owned and operated by Home Trust, Canada’s largest independent trust.
As an online bank, Oaken Financial currently only offers a high-interest savings account and GICs. Both of these products come with some of Canada’s highest interest rates.
Currently, Oaken Financial offers long-term, short-term, and cashable GICs, both as non-registered and registered investments.
Terms range from 30 days to 5 years in length. Rates range from 2.25%* and go as high as 5.05%*
Alterna Bank is an online bank owned by Alterna Savings, Canada’s second oldest credit union. While owned by a credit union, Alterna Bank is a CDIC-insured bank providing competitive GICs, without any bells and/or whistles.
Alterna Bank GICs are available as registered and non-registered investments, with terms ranging from one year to five years in length.
Interest rates start at 4.50%* and go as high as 4.75%*. There is a minimum investment requirement of $500 to purchase any Alterna Bank GIC.
Since GICs are time-sensitive investments that can last for months or years, you need to get the best rate possible.
Below, we’ll look at some of the GIC options available through Canada’s “Big Five” banks. These rates do not exactly give us anything to write home about, but we’ve compared them below nonetheless.
The GIC rates that are offered by Scotiabank range between 2.00%* to 4.75%*.
Although this Big Five Bank offers long-term, short-term, market-linked, and cashable investments alike, the long-term GICs are the most popular choice, as they are also available as RRSP GICs and RRIFs GICs.
Scotiabank GICs offers a program for international students that allows monthly interest payments after an initial investment. It also allows for students to open a monthly bank account with no fees, as well as access to an unsecured credit card with SCENE rewards.
CIBC’s rates can go up to 1.45%* for “bonus rate” non-registered GICs.
Most CIBC long-term rates are available to customers after an initial investment of only $1,000, although you will not be able to receive monthly interest payments unless you invest $5,000.
The longest term GIC that is available from CIBC goes up to seven years, with rates ranging from 3.00%* to 4.75%*.
Many of the most attractive interest rates offered by CIBC, and other banks alike, for that matter, are in non-cashable GICs. These GICs do not permit withdrawals until the end of their investment term.
RBC’s GIC rates will range between 3.00%* and 4.45%*, and most come with a minimum investment between $500 and $1,000.
As the largest bank in Canada, RBC offers somewhat predictable options from cashable GICs to redeemable GICs to short-term (one year) GICs.
In fact, RBC’s cashable GIC options allow you to receive interest in the case of RBC’s prime rate increasing.
If you prefer easy access to your money, RBC also provides options for non-redeemable GICs with even higher interest rates and can even invest your money with a relatively low starting sum.
*Rates are current as of June 2021
BMO, or the Bank of Montreal, offers an impressive GIC catalog, including foreign currency options (with USD being the most popular). BMO uniquely offers a partnership with Air Miles that allows customers to earn one mile every month for every $1,000 that they have invested.
The highest interest rate that BMO seems to offer on GICs is 4.25%*. If you would like to take advantage of these GIC terms, though, you will need to be prepared to make at minimum a $1,000 investment.
As another one of the largest financial institutions in Canada, TD offers a variety of GIC options, including non-registered and registered accounts. TD also offers its customers the choice of a term length of between 1 and 5 years. Rates range from 0.50%* to 3.00%*.
TD also offers several decent cashable options if you would like to transfer your GIC earnings into your chequing account.
A Guaranteed Interest Certificate (GIC) is an investment with a guaranteed return, meaning the investor will receive the amount of interest at the end of the GIC’s term, or when it reaches what is known as maturity.
There is no risk associated with most GICs, considering that it is not tied to any markets. Money placed in a GIC is inaccessible until the GIC’s term is complete.
Not all registered GICs are equal. In fact, like most things concerning finance, every GIC investment scenario comes with its own set of pros or cons, which will vary in their suitability, depending on the individual using them.
Here are some of the most common terms that you are bound to hear when throwing around a GIC, some of which you may find helpful.
Fixed-rate GICs are investments with a guaranteed interest rate that remains the same for the term’s entirety.
This means that, regardless of the length of your investment terms, you will know how the kind of benefits that your investments will yield — the closest thing to fortune-telling that the banking world has to offer!
You guessed it — a variable GIC rate does not come with a promised interest rate and instead has the freedom to change throughout your investment term.
While these can often work out to your advantage, it can also come with a disadvantage, as rates depend largely on the stock market’s strength and performance.
A registered GIC is a term investment registered with the Government of Canada. GICs in these accounts come with certain tax advantages:
The GICs listed above are free to use and can help you avoid paying taxes. Your registered accounts can likewise benefit from the same tax advantages.
Unlike a registered GIC, a non-registered GIC will require accountability in your tax return. However, they do have the advantage of allowing you to withdraw your money at any time without penalty in most cases as long as the GIC is redeemable.
Non-redeemable GICs do not allow the user access to their money until the term is complete. Non-redeemable GICs usually offer higher rates than redeemable GICs.
In general, “short term” refers to any GIC that has a term of less than one year.
A “long term” GIC will last more than one year, by definition, but can last up to ten years.
Although it is not uncommon to find a longer GIC term from the “big banks.” If you are sourcing your GIC from an online bank, you may be hard-pressed to find a GIC that will last more than five years.
Market-linked GICs, also known as equity-linked GICs, are completely linked to the stock market. While this can result in higher-than-average returns, it could also spell out bad news for you and your wallet if there is trouble on the stock exchange.
If you are a Canadian who does a lot of business in the United States or abroad, it may make sense for you to look into foreign currency GICs.
This will allow you to make up for the often weaker Canadian dollar by earning interest in a different currency.
We are all looking for ways to make our money work for us, and it’s not hard to see why. Most of us already work hard enough! A GIC is a lesser-known, low-risk, and low-effort way to add interest-earned cash to your financial portfolio.
*Rates are current as of April 2023
The short answer is: yes, GICs are taxable. Interest earned from GICs in a non-registered account is taxable at the same rate as the earner’s income bracket. That means any interest earned from non-registered GICs is considered earned income and therefore taxable.
However, if you have contribution room left in your TFSA or RRSPs, you should definitely consider maximizing your tax-free earning potential by purchasing a registered GIC. Your earnings are not subject to tax in a TFSA and are only subject to tax upon withdrawal in an RRSP.
It depends. While GICs are among the safest investments available, they do not provide the highest returns when it comes to investment options available. In many cases, they do not beat inflation.
GICs are worthy investments for investors who do not like volatility. If you want to play it safe and beat inflation, GICs are worth it.
Determining the best GIC rate in Canada depends on a number of personal factors, such as how long you are willing to invest money for, how much money you are willing to invest, and what kind of investment you are looking for.
The best practice is to shop around between both brick and mortar and online banks to see which banks are running promotions and which banks are offering agreeable terms. In any case, a good GIC rate typically beats the inflation rate.
