Best GIC Rates in Canada
| Provider | 6-Month | 1-Year | 3-Year | 5-Year |
|---|---|---|---|---|
WealthONE | 5.28% | 5.15% | 4.80% | 4.70% |
EQ Bank | 3.60% | 5.00% | 4.85% | 4.60% |
Equitable | 4.30% | 5.00% | 4.83% | 4.52% |
Hubert | - | 4.60% | 4.55% | 4.50% |
Peoples Bank | 4.00% | 5.00% | 4.70% | 4.50% |
Alterna Bank | - | 4.75% | 4.50% | 4.50% |
Outlook Financial | - | 4.65% | 4.55% | 4.45% |
Oaken | 2.25% | 5.10% | 4.55% | 4.40% |
ICICI | - | 4.70% | 4.40% | 4.40% |
Saven Financial | - | 4.90% | 4.50% | 4.40% |
LBC Digital | - | 4.90% | 4.40% | 4.40% |
Manulife | 3.70% | 4.00% | 4.15% | 4.35% |
Meridian | 3.50% | 4.45% | 4.30% | 4.30% |
Laurentian | 3.25% | 4.65% | 4.35% | 4.25% |
Wyth | - | 4.75% | 4.40% | 4.20% |
Canadian Western Bank | 3.10% | 4.55% | 4.20% | 4.10% |
Tangerine | 3.25% | 4.65% | 4.20% | 4.05% |
FirstOntario Credit Union | 2.80% | 4.55% | 4.20% | 4.05% |
Bridgewater Bank | 4.50% | 4.76% | 4.29% | 4.03% |
Sun Life | 2.95% | 4.45% | 4.10% | 3.95% |
BMO | 3.25% | 4.00% | 3.75% | 3.85% |
TD | 3.25% | 4.45% | 3.50% | 3.85% |
National Bank | 1.50% | 4.50% | 4.40% | 3.85% |
Haventree Bank | 2.01% | 5.05% | 3.95% | 3.80% |
motusbank | 1.05% | 4.35% | 3.90% | 3.75% |
Affinity Credit Union | - | 3.25% | 3.40% | 3.50% |
HSBC | 2.75% | 3.50% | 3.75% | 3.50% |
RBC | 2.75% | 3.00% | 3.30% | 3.40% |
Scotiabank | 2.75% | 3.00% | 3.15% | 3.25% |
Simplii Financial | - | *3.93%* | *3.25%* | *3.20%* |
ATB Financial | 2.50% | 4.00% | 3.20% | 3.10% |
CIBC | 3.25% | 3.50% | 3.00% | 3.00% |
Note: GIC rates shown are for non-redeemable GICs with annual compounding. Interest for 6-month GICs are paid at maturity.
*Compounded monthly
Historical GIC Interest Rates
By Term Length, Redeemable GICs
What Is A GIC?
A guaranteed investment certificate (GIC) is a financial product offered by banks and credit unions throughout Canada. A GIC is a type of investment that provides a guaranteed rate of return over a specific period. The interest rate on a GIC varies, depending on the length of the investment and the institution where it is purchased.In general, the longer you invest in a GIC, the higher the annual ROI you'll earn. However, there may be penalties if you need to access the money early. Continue reading to learn everything about GIC investments in Canada.
How GICs Work
GICs are a type of deposit that is held at a financial institution. When you invest in a GIC, you agree to leave your money on deposit for a specific period, such as one month, three years or five years. In exchange for renouncing your money on deposit, the financial institution agrees to pay you a guaranteed rate of return.
The interest rate on a GIC is generally lower than the interest rate on other investments, such as stocks or mutual funds. However, GICs are considered low-risk investments because they offer a guaranteed rate of return.
When purchasing a GIC, you can choose between a variety of criteria. Note that you also have the opportunity to buy foreign currency GICs. This could be a good idea if you're retiring in another country and want to minimize exchange rate risk by keeping your GIC in your local currency rather than constantly exchanging currencies. However, continue reading to understand the rest of your GIC investment options.
Cashable vs Non-Redeemable GIC
When you invest in a GIC, you have two options: cashable or non-redeemable.
| Cashable GIC | Non-Redeemable GIC |
|---|---|
Your investment can be withdrawn early, without penalty. For example, if you invest in a one-year cashable GIC and decide you want to remove your money after six months, you can do so without penalty. | Your investment cannot be withdrawn early without penalty. For example, if you invest in a five-year non-redeemable GIC and decide you want to withdraw your money after two years, you will have to pay a penalty or lose all interest earned. |
The decision between which type of GIC is right for you depends on your needs and preferences. In general, a non-redeemable GIC provides you with a higher return on investment. This is because financial institutions prefer predictability. You can think of the tradeoff between cashable and non-redeemable GICs as flexibility or a higher return on investment.
Fixed vs Variable Rate GIC
GICs are available in two different types: fixed-rate and variable-rate.
| Fixed Rate GICs | Variable Rate GICs |
|---|---|
Offer a guaranteed interest rate for the term For example,if you invest in a three-year fixed-rate GIC, the financial institution will guarantee to pay you the same interest rate for three years, even if interestrates go up or down during that period. | Offer an interest rate linked to a financial market index, such as the prime rate or the Toronto Stock Exchange (TSX). The interest rate on a variable-rate GIC will go up or down depending on how the index performs. |
Your decision between investing in a fixed vs variable rate GIC depends on your risk tolerance and market outlook. For investors to be compensated for more risk, they require a higher expected return on investment. This is why fixed GICs tend to have lower rates than their variable counterparts. However, your fixed rate is guaranteed while your variable ROI is not. Although in some cases, market-linked GICs have a minimum and maximum allowed return. This will provide you with some predictability.
GIC Terms and Maturity Dates
A GIC term refers to the length of time you agree to leave your money on deposit. The maturity date is when your GIC investment will finalize, and you will receive your money back plus interest. GICs are available in various terms, from one month to 10 years.
The longer the GIC term you have, the higher the annual interest rate you will receive. For example, 5-year GIC rates can be significantly higher than 1-year GIC rates. This is because investors expect to receive a higher return for locking up their money longer.
Tip: The Best GIC For You
As you now understand, many characteristics subdivide GICs in Canada. This section will further discuss the best choices depending on your investment goals. First, know that you have the decisions between
- Penalty-free withdrawal vs. higher interest rate
- Lower guaranteed rate vs. potentially higher speculative rate
- Shorter investment period vs. higher interest rate
Now we can discuss your options based on your goals.
| Maximum Interest Rate, Low Flexibility | Lowest Interest Rate, Maximum Flexibility |
|---|---|
|
|
Taxability of GICs
You may have to pay capital gains tax on your GIC investment depending on the type of account you hold the investment in.
Any interest payments you receive will be considered taxable income if the GIC is held in a regular, taxable account. If the GIC is held in a registered account, such as a Tax-Free Savings Account GIC (TFSA GIC) or a Registered Retirement Savings Plan (RRSP), you will not have to pay any tax on the interest payments you receive.
However, regardless of the account, you still may face penalties if selling a non-redeemable GIC early. This section will compare the tax advantages of holding a GIC in the following accounts.
| Save Taxes on Contributions | Tax-Free Withdrawals | |
|---|---|---|
| TFSA | ||
| RRSP | ||
| FHSA | ||
| Non-Registered |
GICs and Tax-Free Savings Account (TFSA)
The Tax-Free Savings Account (TFSA) was introduced in Canada in 2009 to help Canadians save for retirement. The TFSA is a registered account that allows you to earn tax-free investment income.
Contributions into your TFSA are not tax deductible. However, the TFSA shines when you withdraw money from your account. Withdrawals are not taxed so that you can remove money from the account free of taxes. The TFSA is ideal if you expect to withdraw funds in a higher income tax bracket.
The TFSA is a great way to save for retirement because it allows you to grow your investment without paying any taxes when you withdraw later. You can think of it as paying taxes when you are in a lower income tax bracket and avoiding paying taxes when you are in a higher income tax bracket. Additionally, any interest earned from your GIC investments won't be taxed.
GICs and Registered Retirement Savings Plan (RRSP)
Next, the Registered Retirement Savings Plan (RRSP) is a registered account that allows you to save for retirement. The tax structure is opposite of the TFSA. This is because you receive an income tax deduction on deposits but must pay income taxes on withdrawals. As a result, the RRSP is ideal if you are in a high-income tax bracket and plan to withdraw when you are in a lower tax bracket.
Like the TFSA, any interest earned from your GIC deposits in this account is tax-free. However, you must pay income taxes on withdrawals. The RRSP offers tax benefits that make it an attractive option for retirement savings. While these accounts save you taxes, you may still have penalties for selling a non-redeemable GIC early.
GIC and First Home Savings Account (FHSA)
The recently announced First Home Savings Account (FHSA) combines the best of a TFSA and RRSP. Similar to an RRSP, you receive an income tax deduction on deposits. However, similar to a TFSA, there will be no withdrawal tax. This means you save taxes on both deposits and withdrawals. Previously, you would have to choose one.
The catch with the FHSA tax-free withdrawals is they must be used to purchase a home within 15 years of opening the account.
GICs and Non-Registered Accounts
If you hold a GIC in a non-registered account, you will have to pay taxes on the interest payments. In addition, you won’t receive an income tax deduction on your deposits into the account.
Comparing a GIC With Other Low-Risk Investments
A GIC is a type of low-risk investment. This means that you are not likely to lose money on your investment, but you are not expected to make much money.
The main advantage of a GIC is that it is a guaranteed investment. This means you will at least get your original investment back, plus any interest that has accrued, as long as you hold the GIC until it matures.
A GIC is a good investment for people looking for a low-risk way to save money. While most low-risk investments offer a low return, the primary disadvantage of a GIC is potentially being unable to access your money without incurring fees. Consider these other options if you prefer a higher return on investment or more liquidity.
Canada's Most Popular Low-Risk Investment
High-Interest Savings Account
A high interest savings account is generally the lowest-risk investment and most liquid. You will not lose money on a HISA and can transfer into a chequing account whenever necessary. Additionally, there will likely be no fees associated with a HISA. The main disadvantage to a HISA is that the interest gained will likely not keep up with inflation.
Money Market Fund
A money market fund is a type of mutual fund that invests in short-term debt securities, such as government bills and commercial paper. Money market funds are a type of low-risk investment because they invest in debt securities that are backed by the full faith and credit of the Canadian government or other entities.
The main advantage of investing in a money market fund is getting a higher return than you would with a HISA. Additionally, money market funds offer liquidity, meaning you can withdraw your money at any time without incurring a penalty. The main disadvantage of investing in a money market fund is that the return is not guaranteed, and there is the potential to lose money.
Fixed-Income Securities
Fixed-income securities are debt instruments that pay a fixed rate of interest over the life of the security. The most common type of fixed-income security is a bond.
The advantage of investing in fixed-income securities is that you know exactly how much interest you will receive and when you will receive it. Additionally, bonds are a low-risk investment because they are backed by the full faith and credit of the issuing entity. The main disadvantage of investing in fixed-income securities is that the return is not guaranteed. There is the potential to lose money if the issuer defaults on the payments. Increasing interest rates will also devalue the market value of your bond.
Tip: Differences Between a HISA, GIC and Mutual Fund
The main difference between a HISA, GIC and mutual fund is the level of risk. A HISA is a low-risk investment because the Canadian government backs up to $100,000 through CDIC.
While GICs are also low-risk and backed by CDIC, there are some additional limitations. For example, GICs typically require a minimum investment of $1,000 while many HISAs don’t have balance requirements. Additionally, there may be penalties for early withdrawals
A mutual fund is a higher-risk investment compared to GICs because any entity does not back it. Comparatively, all these investments are low risk when compared to equities or cryptocurrency.
The other main difference is the return on investment. A HISA has a guaranteed return, while a GIC can have a fixed or variable return. A mutual fund does not have a fixed return, and you may even lose money on the investment. The best option for you will depend on your investment goals and risk tolerance.
How to Buy a GIC
After opening one of the investment accounts mentioned above, you will be eligible to buy a GIC in Canada. The first step is to research the available options to find the best GIC rate. At the top of this article, we have listed the best GIC rates in Canada.
The next step is to decide how much money you want to invest and for how long. Once you have decided on those two factors, you can contact the financial institution where you opened your investment account and purchase a GIC. You will typically have to inform your brokerage of the following details.
- The name of the financial institution where you want to purchase the GIC
- The type of GIC you wish to purchase
- The amount of money you want to invest
- The term of the GIC
There are different methods to buy depending on the type of investment brokerage you use.
Online Brokerage
Once you have decided on those two factors, you can contact the online brokerage and purchase a GIC. The process will differ depending on the online brokerage you use, but generally, you will need to log in to your account and place an order to buy a GIC.
Full-Service Brokerage
If you want to purchase a GIC through a full-service brokerage, you must contact your broker and place an order. Usually, people will call their full-service broker and explain the details mentioned above. The broker will find a qualifying investment and inform you of the specifications. Your broker will then place the order and purchase the GIC on your behalf. After the GIC matures, you will receive the interest payments directly into your investment account.
Visit a Bank Branch
If you want to purchase a GIC through a bank, you must visit a branch and speak to a representative. You will likely be limited to purchasing the GICs offered by that bank. For example, you won't be able to buy Scotiabank GICs from an RBC branch. However, if you already have a bank account with your GIC provider then you can purchase them online.
What Determines GIC Interest Rates
GIC interest rates are directly related to your bank's prime rate, which the Bank of Canada Rate influences. The Bank of Canada Rate is the rate at which the central bank lends money to commercial banks. When the Bank of Canada Rate goes up, so does your bank's prime rate and, consequently, the interest rates on GICs. As a result, it's crucial to understand the factors that cause the Bank of Canada Rate to change. If you expect rates to increase soon, a smaller GIC term could be better. This way, you can renew at higher rates instead of being stuck at a lower interest rate for a longer duration.
| Factors That Increase The BoC Rate | Factors That Decrease The BoC Rate |
|---|---|
|
|
History of GICs in Canada
Investments have been around in Canada since the early 1800s when individual investors would purchase government bonds. Around the 1950s, GICs were issued and became a popular investment choice because of their stability and fixed returns.
The early 2000s saw a decline in GICs due to low-interest rates, and high-returning tech stocks. However, they have made a comeback in recent years as investors have become more risk-averse. GICs are now one of Canada's most popular low-risk investment choices and are offered by banks, credit unions, and other financial institutions.
GIC Amount For International Students (SDS)
International students studying in Canada can purchase a GIC to expedite their study permit approval. The program is known as the Student Direct Stream (SDS). At a minimum, students must invest $10,000 to receive faster approval on their study permit. To obtain the expedited permit, you must meet the following criteria.
- Prove you have purchased a GIC
- Hold the GIC in an account that you can't access until you arrive in Canada
- Confirm your identity to the bank
- Receive a lump-sum withdrawal upon arrival with recurring payments
In most cases, each program works as follows. You initially wire transfer $10,000 plus any associated fees. When you arrive in Canada, you visit a branch of the corresponding bank and open an account by confirming your identity. Immediately, the bank will deposit $2,000 into your account. Afterwards, you will receive your initial investment plus interest payments as monthly deposits into your account. After one year, you will have fully received your money back plus interest.
Below, you can find more information on the student GIC programs from Canada's top banks.
| Program Name |
|---|
| Scotiabank StartRight Student GIC |
| CIBC International Student GIC |
| RBC International Student GIC |
| TD International Student GIC |
| BMO International Student GIC |
HSBC International Student GIC |
The Bottom Line
GICs are a low-risk investment choice that has been around in Canada for over 100 years. They offer stability and fixed returns, so they are one of the most popular investment options in the country. Depending on your investment goals, GICs may be the right option for you.
FAQ
A GIC is a type of investment that offers a guaranteed rate of return over a fixed period. The money you invest in a GIC is not accessible until the end of the term, and there may be a penalty for withdrawing your money early. Considering GICs are low-risk investments, they are popular among retirees and other investors who are looking for a safe place to grow their money.
Your GIC account is the location you hold the investment. You can open an investment account at partnering financial institutions. There are many different accounts ranging from a TFSA, RRSP, and FHSA to non-registered accounts. The tax benefits you receive on your GIC investment depend on the type of account you hold it in. The interest you receive will be deposited into your account.
A GIC investment is a low-risk way to grow your money. With a GIC, you invest a fixed sum of money for a specified time, and in return, you receive a guaranteed or variable rate of return. The interest you earn on your investment is paid to you at the end of the term. If you withdraw your money before the end of the term, you may be subject to a penalty.
GIC stands for guaranteed investment certificate. This is because you receive a guaranteed return on your investment.
It depends on your personal investment goals. If you prefer a low-risk investment with predictable returns, it may be worth it. While the returns are not as high as other investments, such as stocks and mutual funds, you are guaranteed to get your original investment back, plus interest. If you have outstanding debt, such as a mortgage or credit card debt, you will want to prioritize paying them off before considering a GIC. That’s because mortgage rates and credit card interest rates can be significantly higher than the rates that you would earn with a GIC.
A GIC does not lose money because it is guaranteed by the Canada Deposit Insurance Corporation CDIC. Up to $100,000 in deposits are insured. You are guaranteed to get your original investment back plus interest. GICs issued by credit unions are insured by provinces rather than the federal CDIC. Many provinces have higher limits than CDIC meaning you are insured on larger deposits. For example, Ontario’s FSRA will insure your GIC up to $250,000.
A GIC ladder is a strategy that can help you maximize your returns and minimize your risk. With a GIC ladder, you spread your money across different GICs with different maturity dates. This way, you have money coming due every year to reinvest it at the current interest rates
For the best ROI on your GIC, it's best to wait for your term to end. However, if you can find a better return elsewhere it could be better to withdraw the funds and re-invest in a different asset. Although make sure to account for early withdrawal fees when calculating if your next opportunity is better.
The interest rate on a GIC can vary depending on the type of GIC and the term. For example, a short-term GIC will usually have a lower interest rate than a long-term GIC. Additionally, a fixed-rate GIC will usually have a higher interest rate than a variable-rate GIC.
Generally, you can cash in your GIC early, but you may be subject to a penalty. The penalty is usually equal to the interest that would have been earned if the GIC had been held to maturity. For example, if you cash in a 1-year GIC after 6 months, you would lose the interest that would have been earned in the second 6 months.
Yes, you can transfer a GIC from one bank to another. However, you may be subject to a penalty if you cash in the GIC early. Additionally, the new bank may not offer the same interest rate as the original bank.