as of September 2022
Canadian Western Bank
Note: GIC rates shown are for non-redeemable, registered TFSA GICs as of September 2022.
A tax-free savings account (TFSA) is a type of registered account that lets you save and invest inside it tax-free, while a guaranteed investment certificate (GIC) is a type of investment where your principal is protected. GICs can be held in registered and non-registered accounts. When a GIC is held in a TFSA, it’s known as a TFSA GIC. With a TFSA GIC, your deposits and withdrawals are not taxed. In other words, your GIC interest earnings are tax-free!
There is a wide variety of TFSA GICs available in Canada. Common variations on TFSA GICs that you can buy from a Canadian bank or credit union include non-redeemable GICs, cashable/redeemable GICs, and a multitude of GIC term lengths. This covers the popular 1-year GIC and 5-year GIC term lengths.
The main difference between a regular GIC and a TFSA GIC is how your interest earnings are taxed. With a regular GIC, the money that you make from a GIC, which is usually paid out as interest, would be taxed as interest income. In Canada, interest income is 100% taxable as ordinary income.
You'll also need to pay tax on your accrued interest income even if you haven't received the interest payment yet. For example, some GICs compound interest annually but only pay out interest at the end of the term or at maturity. This means that you will need to front money to prepay your GIC interest taxes before you even receive any money from your GIC!
GIC interest income doesn’t receive preferential tax treatment that capital gains income and dividend income benefit from. That’s why holding a GIC in your TFSA or RRSP instead of a non-registered account can save you on your income taxes.
Another difference between GICs vs. TFSA GICs is that most Canadian banks do not offer foreign currency GICs for TFSAs and other registered accounts. If you’re looking to invest in a USD GIC, you’ll need to use a non-registered account instead. However, you can still use a registered TFSA or RRSP account from an online brokerage to purchase U.S. and other foreign currency investments.
Just like other GICs, TFSA GICs are covered by CDIC deposit insurance. If you invest in a TFSA GIC from a participating CDIC member institution, up to $100,000 is covered. This includes both the principal and interest.
TFSA coverage is a separate category for CDIC insurance. For example, if you have $100,000 in a regular GIC and $100,000 in a TFSA GIC at a bank, then you are fully insured for both GICs for a total of $200,000. That’s because you’re covered for two separate CDIC categories of $100,000 each.
However, if you have $100,000 in a TFSA GIC and $50,000 in a TFSA term deposit at the same bank, you’re only covered for up to $100,000. That is the maximum for the one category that you are covered in, which is TFSA deposits. If you’re looking to invest more than $100,000 in TFSA GICs and want to ensure that they are fully protected by the CDIC, you will need to split them up into multiple TFSA GICs from more than one bank. Some credit unions may have higher coverage limits by their provincial regulators.
RBC TFSA GICs have a low minimum deposit of just $500. That's lower than RBC's regular GICs that require a minimum deposit of $1,000. You can choose to have your RBC TFSA GIC with a term length as short as 30 days, to as long as 10 years. RBC calculates TFSA GIC interest annually, with interest paid at maturity.
Redeemable RBC TFSA GICs are also available, with a prior redemption rate of 0.05%. Other registered GICs offered by RBC include RRSPs, RESPs, RDSPs, RIFs, and LIFs.
TD’s TFSA GIC rates are the same as their non-registered GIC rates. The investment minimum is also the same, at $1,000 for terms from 1 year to 5 years. Only RRSP, RIF, and RESP GICs at TD have a lower investment minimum of $500. Otherwise, TD TFSA GICs have a minimum investment of $5,000 if you're looking to invest for 270 days or less.
Scotiabank TFSA GICs have a low minimum investment of $500, even for short-term GICs from 30 days to 1 year. Scotiabank's market-linked GICs can also be held in TFSAs, with a minimum investment of $500. Market-linked GICs have a minimum guaranteed return and follow a certain index. This keeps your TFSA principal protected, while giving the possibility of much higher returns.
BMO offers competitive TFSA GIC rates among the major Canadian banks. BMO's TFSA GIC has a minimum investment of $1,000, with terms from 1 to 10 years. BMO also has redeemable TFSA GICs with a minimum investment of $1,000.
CIBC currently has the highest TFSA GIC rates in Canada out of the major banks, with their 3-year and 5-year GIC rates close to being the best in the country. CIBC has a lower transfer-out fee than other banks if you decide to transfer your TFSA to another financial institution. The fee that CIBC charges is $100. In comparison, RBC charges $150, while Tangerine charges only $50.
Other GICs offered by CIBC that are eligible to be held in TFSAs include CIBC market-linked GICs and their 1-year cashable TFSA GIC.
National Bank has a wide variety of TFSA GIC options. This includes terms from three months to five years, with a minimum investment of just $500. National Bank also offers market-linked TFSA GICs, redeemable TFSA GICs, as well as speciality GICs that provide regular cash flow or withdrawal flexibility.
Tangerine’s TFSA GIC rates are among the best in Canada. Tangerine also has no minimum investment for their TFSA GIC, which means that you can invest with as little as $1. Term lengths start from 90 days and can go up to 5 years.
EQ Bank currently offers the highest TFSA GIC rates in Canada. With terms from 3 months to 10 years, you can invest with as little as $100. If you already have a savings account with them, EQ Bank claims that you can even purchase a TFSA GIC in seconds. EQ Bank doesn’t offer redeemable TFSA GIC options.
ICICI Bank is unique in having a very high TFSA GIC rate that beats out the major banks while still being a redeemable GIC. This means that you can withdraw from your TFSA GIC early without losing interest. ICICI Bank's current early redemption rate as of September 2022 was 0.50%. ICICI Bank’s TFSA GICs pay out interest at maturity.
Canadian Western Bank's (CWB) TFSA GIC is called the WestEarner TFSA GIC. This GIC has a minimum deposit of $1,000, and is also fully redeemable before maturity. However, the early redemption rate is 0.00%. This means that if you withdraw from your CWB TFSA GIC early, you won't receive any interest. Terms range from 12 months to 120 months (10 years).
For Albertans looking to invest in a TFSA GIC, ATB Financial offers very competitive rates. ATB TFSA GIC options include redeemable, non-redeemable, and blended rates. Through their redeemable Springboard GIC, you invest for 3 or 5 years with the interest rate increasing each year. The minimum investment at ATB Financial is $500 for their registered GIC accounts.
You’ll need to have available TFSA contribution room in order to invest in a TFSA GIC. Be sure to check your contribution room to make sure that you don’t go over your lifetime limit. Going over may result in penalties.
You can purchase TFSA GICs from banks, credit unions, or other financial institutions. If you already have an account with them, you might even be able to purchase TFSA GICs online in minutes.
When buying a TFSA GIC, you'll need to decide on a few things: the amount of money to invest, the term length, how interest payments are treated, and what to do at maturity. Once your TFSA GIC matures, you can have it paid out to your bank account, or automatically reinvest it into another preselected GIC term.
TFSA GICs, as well as other registered GICs, offer tax benefits when compared to a non-registered account. Just like other GICs, your initial principal is protected. This means that you can’t lose any money. Your principal and interest is also insured by the government in the event of a bank failure.
The downside of a TFSA GIC is the lower return that usually comes with a GIC. You could be using your TFSA room for other investments instead, such as stocks, that would generate a higher return and potential tax liability.