How do you find the best Guaranteed Investment Certificate (GIC) rates? What even is a GIC anyway?
Maybe a financial planner or someone at your bank told you to take a look at GICs as a way to save more money. But not everyone knows what a GIC is, how it accrues interest or how to shop for the best GIC interest rates. After sorting that out, you can look at the different types of GICs that are available for short-term and long-term investing. That way you can make a sound investment and have more confidence when you set up your new GIC account.
What is a GIC?
A guaranteed investment certificate (GIC) is a safe way for Canadians to invest money. While stock market investments have their fair share of risks, GIC’s don’t. They promise a return on your investment based on the interest rate you lock-in. A GIC is similar to a savings account. You save a specific amount of money over a set term with an interest rate that’s locked in for that particular term. When the term ends, you will get all your original money back plus the interest that is accrued. Let's say the bank offers a 2.05 percent tax-free savings account and 3 percent, 1 year GIC. If you have a few thousand dollars, the higher interest rate from the GIC will give you more money once it matures.
How to know your money is safe
Most GIC’s are eligible for coverage under CDIC. CDIC stands for Canada Deposit Insurance Corporation. It guarantees deposits for customers that are up to $100,000. Credit unions, on the other hand, offer provincial insurance so they protect 100 percent of the money deposited regardless of the amount.
GIC pros and cons
Pros
- More often than not, interest rates offered are higher with a GIC than your typical savings account
- In a non-cashable GIC, your money is locked in for a specific term so you have extra savings you can't touch. There are redeemable GICs but they often have less competitive rates.
Cons
- You will incur a stiff penalty if you need to withdraw the money from a non-reedemable GIC and you might forfeit the interest – be sure to pick the right savings product for you.
- The most competitive GIC products available will come with a minimum investment.
Types of GICs
There are different types of GICs. These include:
- Cashable or redeemable GIC: You can withdraw your money before the term ends. Interest rates are typically lower for this type of GIC account.
- Non-cashable or non-redeemable GIC: You cannot withdraw any of the money before it reaches its maturity date. These GICs come with the most competitive interest rates.
- Variable-rate GIC: While most GICs offer fixed interest rates, this type of GIC has an interest rate that varies.
- Market-linked GIC: The return you will receive with this type of GIC is based on the stock market’s performance.
- Short-term or long-term GIC: GICs can be locked for specific timeframes from as little as 30 days to a few months to a multiple years.
Other helpful information about GICs
Here’s more helpful information on GICs:
- Some GIC investments only require $500 or $1,000.
- There are usually no fees to set up a GIC account.
- Most GIC accounts are set at a fixed rate (but some are variable). Terms can range from 30 days to five years.
- The longer your money is locked in, meaning the longer the term, the more money you will make from compound interest (if your account compounds – not all GICs do).
- Interest for a GIC account can be paid out each month, once a year, or when the GIC reaches maturity.
- If you have an emergency, you can withdraw your GIC but it has to be for qualifying circumstances (job loss, death in the family).
- With a redeemable or cashable GIC, there is no penalty if you take money out early but interest rates are lower.
- Money saved in a GIC is in most cases protected by CDIC insurance but only for up to five years.
- Your GIC can be held in a registered account if you have a TFSA, RESP, RRIF or RRSP. If it is held in a non-registered account, you will have to pay tax on any interest you earn.
A GIC’s interest rate
GICs let you invest your money or store it in the bank. Depending on the interest rate, you can make extra money from the accruing interest when your GIC matures, meaning when the term ends.
The interest rates can change at the bank and not all banks will offer the same rates. Here's an example of the type of return you might make. Let's say you live in Toronto and you invest $5,000 in a one-year GIC through Oaken Financial at 2.55% interest. Your total at maturity will be $5,127.50 because you will make a $127.50 return. The $127.50 is the interest that accrues on the $5,000 you locked in the account.
How to find the best GIC rates
If you’re interested in setting up a new GIC account, a good place to start is comparing options online. Credit unions and digital banks usually offer more competitive rates. And, keep in mind, the higher the interest rate, the more money you will make when your GIC reaches maturity.
How to compare GIC rates online
You compare more than 100 GIC rates from the leading banks and credit unions in Canada on RATESDOTCA:
- Enter your province or territory and your initial investment, ($500, $1,000).
- Select interest compounded (daily, monthly, annually).
- Select if you want a registered or non-registered GIC (the most popular are non-registered).
- Choose if you want cashable/redeemable. Selecting yes will give you a lower interest rate. Selecting no will give you a higher interest rate but you won't be able to withdraw the money until the term ends.
Best GICs for 2019
We highlight the best GICs on offer each year based on rate and market relevance. These GICs will offer consumers the most savings and features. This year’s list includes:
2019 Best of Finance Best GIC Category Winner: Oaken Financial
In the 2019 Best of Finance awards, Oaken Financial was selected because it is an exceptional bank that has no hidden fees. They provide customers with the most competitive interest rates. The minimum deposit amount is $1,000 for their non-redeemable GICs. Interest rates range from 2.70% for one year to 3.05% for five years and they allow for flexible transfers from savings accounts to GICs if you’re a customer.
These rates were the rates offered at the time those awards were given and may change at any time.
Oaken Financial offers customers the convenience of online, mobile and physical locations. Any GIC or savings account that you open is backed by the Home Bank and Home Trust Company which is a member of the CDIC.
Motive Financial
Motive Financial is an online bank that makes it easy to bank remotely. Because the bank is online, customers can benefit from competitive interest rates. A minimum GIC investment will start at $1,000 while interest rates range from 2.34% for a 12-month term up to 2.50% for a 60-month term. Motive Financial is a CDIC member through Canadian Western Bank.
2019 Best of Finance Best GIC Runner Up: EQ Bank
EQ Bank is an online bank that offers competitive GIC interest rates. With a minimum investment of only $100, interest rates range from 2.90% for a five-year GIC to 3% for a three-month GIC.
Other GIC options to explore
B2B Trust
A wholly owned subsidiary of Laurentian Bank of Canada, B2B Trust is a federally chartered trust company that serves a network of some 15,000 financial professionals across key business verticals including financial advisors and their dealerships; deposit and mortgage brokers and their firms; mutual fund and insurance manufacturers; MFDA and IIROC members.
TD Canada Trust
One of Canada’s “Big 5” banks, TD Canada Trust has more than 85,000 employees globally. The Toronto-Dominion Bank (TD) offers a full range of banking and financial products through a variety of subsidiaries, collectively referred to as TD Group. TD Canada Trust is the personal banking arm of TD in Canada.
CIBC
CIBC is a leading North American financial institution celebrating 140 years of serving clients in Canada and around the world. Through two distinct business lines, CIBC Retail Markets and CIBC World Markets, CIBC provides a full range of products and services to almost 11 million individual and small business clients and meets the financial needs of corporate and institutional clients.
Libro Credit Union
Libro Financial Group is a credit union based in South western Ontario that focuses on residents in the surrounding area. Libro was the Winner of many national credit union marketing awards - including Best in Class in 2007.
National Bank of Canada
The National Bank is an integrated group which provides comprehensive financial services to consumers, small and medium-sized enterprises and large corporations in Canada. Founded in Quebec City in 1859, the Bank has grown while striving to always earn the trust of its various stakeholders and contribute to the development of the communities it serves.
PACE Savings and Credit Union
PACE Savings and Credit Union is an Ontario based credit union focusing on the Greater Toronto Area. Membership is open to all residents and businesses in the province of Ontario, Canada.
Rapport Credit Union
Rapport serves over 21,000 members at 12 branch locations, with close to 90 employees and approximately $430 million in assets under administration. A member-owned institution, Rapport provides a full range of banking services, from savings and chequing accounts to loans and mortgages to financial planning and investment management.
Scotiabank
Scotiabank is one of North America's premier financial institutions and Canada's most international bank. With a team of more than 88,000 employees, Scotiabank Group and its affiliates are dedicated to helping their 23 million customers become better off through a broad range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets.
State Bank of India
SBI Canada Bank (“SBIC”), was established in 1982 as a wholly owned subsidiary of State Bank of India , the largest Bank in India with more than 200 years of reputation for customer’s trust and service. State Bank of India (Canada) services Canada in Ontario and British Columbia through its six branches: Toronto, Mississauga, Scarborough, and Brampton, Vancouver and Surrey.
Tangerine Bank
Tangerine Bank (more commonly known as Tangerine, and previously as ING), is a Canadian direct banking subsidiary of Scotiabank. Tangerine offers savings accounts, Tax-Free Savings Accounts (TFSAs), no fee chequing accounts, and other personal finance products. Along with PC Financial, Tangerine is often touted as having the best customer service in the Canadian banking industry. Tangerine Bank is a CDIC member.
The Great West Life Assurance Company
Great-West Life, together with its subsidiaries, London Life and Canada Life, is a leading Canadian insurer, with interests in life insurance and health insurance, investment, retirement savings and reinsurance business, primarily in Canada and Europe. Great-West Life is a wholly-owned subsidiary of Great-West Lifeco, a member of the Power Financial Corporation group of companies.
