In times of uncertainty, Guaranteed Investment Certificates, or GICs, are a stable investment. Traditional fixed-rate GICs allow you to lock-in at a certain interest rate or annual percentage yield (APY) and earn that interest on top of your principal, as long as you sock away that money for a certain length of time or term.
GICs can range in term from 30 days to 10 years, but Canadians most commonly invest in them for one to five years. The APY differs at maturity depending on the term you choose.
However, there are many different types of GICs. Some are fixed-rate, and give you a guaranteed interest rate over the term, others are market-linked, giving you variable interest based on the performance of a stock index for higher potential returns, but no guaranteed interest.
There are hundreds of GICs on the market, including types other than those mentioned above. With this in mind, Forbes Advisor Canada took a look at the best to help you make the most of your hard-earned savings.
The following are the best GIC rates in Canada as of May 3, 2024:
We compared 504 GICs at 43 financial institutions to find some of the best options available. Learn more about why we picked each GIC, the pros and cons and the rate details.
To create this list, Forbes Advisor Canada analyzed 504 guaranteed investment certificates (GICs) across 43 financial institutions, including a mix of traditional brick-and-mortar banks, online banks and credit unions. We ranked each account on nine data points that included annual percentage yield, minimum deposit requirements, (low, medium and high) customer service, compound interest schedule, available terms and availability.
The following is the weighting assigned to each category:
GIC with higher APYs rose to the top of the list. Minimum deposit requirements of $10,000 or higher affected scores negatively. Investments with daily compounding interest schedules were scored higher than those with monthly or quarterly schedules. To appear on this list, the GIC must be nationally available.
GIC rates can be up to 5.50% with terms ranging from 30 days to six years. If the GIC is market-linked, it provides variable interest based on the performance of a particular securities index. These market-linked GICs can offer maximum returns as high as 100%, but, unlike traditional GICs, those maximum returns are not guaranteed—even if there’s a better-than-average chance that it’ll at least be higher than a fixed-rate GIC. It’s important to know that GIC interest rates change with the overnight interest rate set by the Bank of Canada (BoC). Therefore, GIC interest rates are not static and can change as much as daily, depending on the market.
As of May 1, 2024, the national average GIC interest rate is 4.40%, unchanged from last week but higher than the long-term average of 4.38%. It has an average growth rate of 9.19%. Roughly one year ago, the rate was 3.03% with a year-over-year increase of 45.21%.
Banks can vary greatly in the GIC rates they offer, with online banks tending to offer higher rates than national brick-and-mortar banks.
GIC rates have been going up thanks to the Bank of Canada’s efforts to stave off inflation through successive interest rate hikes. Though the policy interest rate is now paused at 5.oo%, as of April 10, 2024, it was raised by the bank 10 times since March 2, 2022. With the policy rate up, the overnight rate—the rate banks used to lend to each other overnight—usually follows suit.
The national average APY for a one-year GIC is currently 4.40%. A year ago, the average 1-year GIC was 3.03% and in April 2022, the average 1-year GIC APY was 1.25%.
The BoC periodically adjusts its benchmark policy interest rate, which underpins most interest rates, including the rates paid on GICs. When the Bank announces a new policy rate, interest rates throughout the Canadian economy shift accordingly.
When the Bank attempts to combat inflation, they will usually increase rates to tighten the money supply. When unemployment is high or fears of a recession persist, the BoC will typically lower its target rate to spur growth.
Any adjustment in the policy rate is usually followed by a corresponding adjustment in the GIC interest rates offered by banks. Banks may also adjust GIC rates prior to an announcement by the BoC based on speculation about future interest rate changes.
As of April 10, 2024, the BoC policy interest rate is 5.00% where it has held since July 12, 2023. Currently, inflation is at 2.9%, but still hasn’t reached the BoC’s goal of 2%. This isn’t expected until later this year.
A guaranteed investment certificate, known as a GIC, is an investment product offered by banks and trust companies that offer a fixed, low rate of return over a term of either one month or up to five years. though some GICs have a maximum term of ten years. Some GICs offer a variable rate of return (also called annual percentage yield or APY, for short) that is tied to the performance of an equities index and if no interest is generated, 100% of the principal invested is returned to you. These are market-linked GICs and they typically give a better rate of return than the traditional fixed-rate GIC. In the U.S., they offer a similar financial product called a CD, or certificate deposit.
When you buy a GIC, you are lending the bank your money for a stated term (or length) of deposit. This means you will not have access to the money you invested, and the interest it generates, for the length of the term.
In most cases, the longer the term, the more interest your money will generate. Though most GICs end at five years, terms can go up to a maximum of ten years. The minimum deposit for a GIC is typically $500 and GICs can be placed inside registered accounts, such as RRSPs, RESPs, RDSPs and TFSAs. These accounts have unique benefits, such as contribution matching by the government (with a RESP) or tax-deferrals with a RRSP where your contributions grow tax-free until withdrawal. Or, in the case of a TFSA, aren’t taxed at all up to a contribution limit. GIC deposits are also insured up to $100,000 by the Canada Deposit Insurance Corporation (CDIC).
GIC rates are set like other banking rates. Banks and credit unions often use an index rate, typically the Bank of Canada overnight rate (also known as the policy interest rate), as a base to set rates for all interest-bearing accounts.
When the policy rate rises, banks and credit unions will generally increase the interest rates on accounts like savings and GICs. When the policy rate falls, banks will then lower their rates on those same accounts.
In addition to tracking current interest rates in the economy, banks and credit unions set rates based on a GIC’s term. Generally, the longer you keep your money in a GIC, the higher your interest rate. However, banks and credit unions may feature or promote individual terms at higher rates.
There are several types of GICs that all affect your investment in unique ways. Availability may vary between banks.
A traditional fixed-rate GIC features an interest rate or annual percentage yield (APY) that doesn’t change for the duration of the term. The interest is calculated at the end of the term at maturity.
Sometimes called step-rate GICs because they use stairs to tell you how the interest is calculated, an Escalator GIC is a GIC where the APY is guaranteed to go up every year.
Market-Linked GICs are hybrid GICs that mix the features of traditional GICs with stock-based investments. Though your principal investment is 100% guaranteed like a traditional GIC, the interest generated is based on the performance of the stock index that the GIC is linked to. This means the interest generated is variable and the maximum interest you can get is limited, but still potentially higher than traditional fixed-rate GICs.
Variable rate GICs will give you an APY that’s higher than the traditional fixed-rate as it’s tied to the prime interest rate. when interest rates go up, so does the APY. Conversely, when the prime rate goes down, so does the interest you can earn.
Registered GICs are GICs placed in registered accounts like RESPs, RRSPs, TFSAs and RDSPs. Since the GIC is in these accounts, it gets all the government benefits that come along with it, like the opportunity to grow your savings tax-free or to only be taxed on your contributions at withdrawal.
In the case of a RESP, your contributions are currently matched by the government through the Canada Savings Grant and/or the Canada Savings Bond and can be invested in the GIC at your direction. Non-registered accounts don’t have any of these government-sponsored benefits, but they also have no restrictions, especially no contribution limits.
The difference between redeemable, non-redeemable and cashable GICs is whether you can withdraw early without paying a penalty and how much interest you earn for doing that.
Redeemable GICs. These allow you to withdraw your money without paying a penalty at any time, but you will receive a lower APY up to the time of withdrawal. If you keep your money in a redeemable GIC until maturity, you’re entitled to a higher APY, so with redeemable GIC interest rates are tiered.
Non-redeemable. These are regular GICs with no early withdrawal privileges, unless you want to pay a penalty.
Cashable GICs. Cashable GICs allow you to withdraw your money from a GIC at any time before maturity without paying a penalty as long as you do so before the waiting period. This is usually the first 30 days your money is in a GIC. In exchange for being able to withdraw your money at any time, you will get a lower interest rate than GICs that aren’t cashable. If you withdraw early, you will keep all interest earned up to the date you withdrew unless you withdrew during the waiting period. In that case, you get 0%.
GICs may be worthwhile for those who want low-risk and guaranteed returns. They can also benefit those interested in keeping their savings locked up from temptation.
Before you settle on a GIC, make sure you shop around and compare GIC rates to ensure you’re getting the highest rate of return possible.
Another important consideration with GICs is the likelihood of having to pay an early withdrawal penalty if you withdraw your funds before the stated maturity date. Or is your money locked in until maturity, except in the case of death.
Benefits of GICs
There are several reasons why GICs are a smart way to build your savings.
Drawbacks of GICs
There are also some drawbacks to guaranteed investment certificates.
GIC rates are set by banks and credit unions based on factors like the term length and the current interest rate environment. The highest rates are typically reserved for longer GIC terms.
Guaranteed investment certificates carry fixed interest rates for the most part, making it easy for individuals to calculate the exact return to expect. You can calculate your guaranteed return on a GIC using the following information:
You can also use a GIC calculator to determine how much interest you’ll earn with a GIC. For example, if you opened a 12-month short-term GIC earning 2.50% APY and deposited $1,000, you’d earn $25 over the course of one year at maturity. If you chose a two-year GIC with that same rate, you’d earn $50.62 by the end of two years. Plug in different term lengths or deposit amounts to see how it affects the overall savings earned.
GICs are safe. In the event of a bank failure, these products are insured by the CDIC up to $100,000 per depositor, per bank, for each account ownership category. The CDIC insures GICs up to the same amount at credit unions as well.
The amount of interest you’ll earn on a GIC depends on the amount you invest, the term of the GIC and the interest rate. The easiest way to estimate how much you could earn on a GIC is to use a GIC calculator, as the math can get a bit tricky.
Here are some examples demonstrating the effects an increased investment and compound interest can have on your bottom line.
A $1,000 GIC earning a 3.50% APY will net you $35 in interest over the course of one year. This is a straightforward calculation because you simply multiply the APY by the amount of your initial investment. But when looking at terms other than one-year GICs, it’s important to understand that the APY is an annualized rate and that interest compounds.
For instance, if you invest the same $1,000 in a six-month GIC, you’ll earn $17.34 in interest—less than half the amount you’d earn on a one-year GIC. That’s because the effects of compound interest grow with time, and you’ll miss out on six months of compounding.
If you put $1,000 into a five-year GIC with a 3.50% APY, you’ll accrue $187.68 in interest, which is more than five times the amount you would earn from a one-year GIC, again due to compound interest.
A $10,000 GIC with a five-year term and an APY of 3.50% will earn $1,876.86 in interest. That’s exactly 10 times what a $1,000 investment would earn.
Even a modest increase in an interest rate can make a notable difference in the total amount of interest you earn—especially for longer investments.
Use the list of GICs above to start your search for the best rates. Compare rates from several banks and credit unions to find the best options. Pay attention to any deposit requirements and possible withdrawal penalties before opening a GIC. Since your funds are inaccessible for the length of the term, do your due diligence to determine how much money you can afford to park in a GIC account. Or, find a redeemable or cashable GIC that allows you to make an early withdrawal under certain conditions, so you don’t end up paying a withdrawal penalty later.
Banks and credit unions offer GICs in a wide range of terms and types. While APY may be the main factor in play when shopping for a GIC, there are other factors to consider as well. Here’s what to keep in mind when choosing a GIC:
APY: The best GICs offer annual percentage yields that keep your money safely growing while meeting your savings goals.
Compounding schedule: The faster your interest compounds, the more money you earn. Look for a GIC that compounds daily.
Minimum deposit: Requirements for minimum deposits vary by bank and credit union. Decide what you can realistically deposit before opening an account.
Term: Your time horizon is a significant factor in the GIC account you choose. GICs are time deposit accounts. Align the GIC’s term with when you’ll need access to your money. If you’re interested in using a GIC laddering strategy (see below), look for a bank or credit union that carries terms that can help you reach that goal.
Early withdrawal penalty: You’ll generally have to pay an early withdrawal penalty if you need access to the money in your GIC before its maturity date. These penalties vary by institution and term, but they can often be costly—eating up interest earned and occasionally some of your principal investment.
Customer experience: Should a question or problem arise, the institution’s customer service department should be reachable, helpful and responsive.
Digital banking: Because online institutions tend to offer the best GIC rates, it’s important to find banks and credit unions that provide innovative online and mobile banking services.
Safety: Look for the Canada Deposit Insurance Corporation (CDIC) to insure your account at a bank. In the event of a bank failure, it protects up to $100,000 per depositor, per bank, for each account ownership category. It also works at credit unions.
Perhaps most importantly, consider your goals. GICs generally work best for short-term financial goals, like saving up for a down payment on a car. The GIC you choose should closely match the financial goal you’re trying to meet. For example, if you plan on purchasing a vehicle in a year, consider investing in a one-year GIC with a high interest rate. This allows you to access your money when you need it, and it’s also an excellent way to keep you from dipping into your savings prematurely.
Traditional GICs aren’t your only option. There are a number of different types of GICs available, all of which are beneficial in different ways. If you need more liquidity out of a GIC, for example, you may benefit from a redeemable GIC.
Unlike other deposit accounts, banks don’t charge monthly maintenance fees for GICs. However, withdrawing your funds prematurely may result in one of the following fees.
You can usually open a guaranteed investment certificate online or in person at banks or credit unions. Follow the steps below to buy a GIC.
1. Choose the right GIC and term for your needs.
2. Apply for an account online or in-person.
3. Provide the required personal information to confirm your identity, such as your address, phone number, social insurance number and driver’s license or other government-issued photo ID.
4. Once approved, you can fund your GIC using a linked bank account or other approved methods.
A good time to open a GIC is when interest rates are on the rise. For example, in a high-inflation environment, the Bank of Canada tends to raise the policy rate. This impacts interest rates on banking products, including GICs.
Regardless of timing, a GIC may be a good option when you’re saving for a specific goal, whether it’s a housing down payment or a new car you’re planning to buy in the next few years.
Thanks to the combination of low risk and high returns, a GIC may also be worth considering when you have a large sum of money you want to keep safe. This way, you can earn more than you would with a regular savings account and avoid the value fluctuation of the stock market.
Longer-term GICs tend to give you a higher APY. They also require you to put away your money for a long period of time.
One way to get the benefits while lessening the lack of access to your money is to engage in a GIC ladder strategy. This occurs when account holders spread their money across different GICs with varying terms. A portion of the money goes toward short-term GICs, while another portion goes to longer-term GICs.
As one of the GICs matures, the money, for example, may be reinvested in a new five-year GIC. Eventually, you would have a five-year GIC maturing each year. This will enable you to have some access to your money and, at the same time, keep it in a higher-yielding savings vehicle.
GICs may not provide a double-digit return right now, but you can get a higher rate if you are willing to shop around. Thanks to the increased competition in the marketplace, consumers have many options from traditional banks and their online brethren.
Banks and credit unions of all kinds want your business and will pay for it with attractive returns, making comparison shopping non-negotiable when purchasing a GIC.
A GIC ladder is a savings strategy that involves opening several guaranteed investment certificates with varying maturity dates. Creating a GIC ladder can help you take advantage of higher interest on longer GIC terms without locking up all of your funds for an extended period of time.
Here are the steps to build a GIC ladder:
Say you have $5,000 to save and you want to open five GICs. You could add $1,000 to each GIC so that they all have the same amount, but for different terms and at different rates. Your GIC ladder would look like this:
On the other hand, you could choose to divide them up for different amounts, with the highest balance earning the highest APY. For example, something like this:
This GIC ladder example assumes that your GICs are organized by term and APY from shortest and lowest to longest and highest. But, you can invert the process and put the most money into shorter-term GICs and the least into long-term GICs. How you structure your GIC ladder depends on your savings goals.
Pros
Cons
Since a GIC is an investment that gives you guaranteed returns, it’s important to figure out how to get the most out of it.
GICs aren’t the only way to invest, there are plenty of alternatives out there but how do they stack up?
If you’re comfortable locking your money away for a stated term while it earns higher potential interest than other investment vehicles, GICs may be right for you. However, some investments, like stocks or mutual funds, may give you better returns even though your principal investment is at greater risk of going down due to market forces.
Our research is based on information from the following financial institutions: RBC, TD, BMO, National Bank, CIBC, Scotiabank, B2B Bank, Bridgewater Bank, UNI Financial, Canadian Western Bank, Canadian Tire Bank, Coast Capital Savings, Digital Commerce Bank, EQ Bank, Wealth One Bank of Canada, First Nations Bank of Canada, Laurentian Bank, Alterna Savings, Manulife Bank, Equitable Bank, National Bank of Canada, Motus Bank, Achieva Financial, Peoples Bank of Canada, Simplii Financial, Tangerine Bank, VanCity, VersaBank, General Bank of Canada, Haventree Bank, HSBC, ICICI Bank Canada, SBI Canada Bank, CTBC Bank, Bank of China (Canada), KEB Hana Bank Canada, Shinhan Bank Canada, Meridian Credit Union, Servus Credit Union, Envision Financial, Steinbach Credit Union, Affinity Credit Union, Prospera Credit Union, Conexus Credit Union, ConnectFirst Credit Union, Access Credit Union, Assiniboine Credit Union, RFA Bank of Canada, VersaBank, Habib Canadian Bank, Industrial and Commercial Bank of China (Canada), Desjardins Ontario Credit Union.
GIC rates generally go up when the Bank of Canada raises the policy interest rate and the overnight rate that banks use to borrow money and lend money to each other, so if the BoC raises rates that’s when they will go up.
GIC rates rise when the Bank of Canada (BoC) policy interest rate rises and according to the competitive banking industry environment they find themselves in, so in times of recession, when the BoC is raising interest rates to help curb inflation, expect GIC rates to go up.
The best GICs are market-linked GICs because they can give you a better potential return than a fixed-rate GIC. The best ones can be found at RBC, Laurentian Bank and CIBC.
A good APY on a fixed-rate GIC is anything between 4% to 5% or higher in any given year of a term. A good maximum return on a market-linked GIC is between 60% and 100% based on the performance of the particular stock index the GIC is linked to.
A high yield guaranteed investment certificate is a GIC that offers high returns (high annual percentage yields) on your investment at the point of maturity.
A GIC pays an annual percentage yield on top of your principal investment for every year of the term your money is deposited. The national average APY for a one-year GIC is currently 3.03%. However, APY can be as much as 5.25% in a single year on a GIC. Just remember that rates change frequently, so lock in the best rates for the term that fits your needs before they go down.
Current GIC rates can be as low as 1.25% and as high as 5.25% in the current economic environment.
If a GIC is non-redeemable, you simply may not be able to withdraw it early except in cases where the accountholder dies and the proceeds are given to their next of kin. Some banks may give you a lower interest rate on the money you withdraw and sometimes you may have to pay a fee to withdraw. If you likely will be cashing out early, get a cashable GIC which allows you to withdraw with no penalty and still earn interest at a lower rate.
You leave money in a GIC for the length of a predetermined term. Terms average between 30 days and five years, but can be as high as ten years.
Since GICs earn interest income, they are taxed at your marginal tax rate each year. There are no tax breaks for interest income.
Learn more: Are GICs Taxable?
