A Guide to GIC Rates and The Best Guaranteed Investment Certificates in Canada

Posted on July 12, 2018 by in Investing

A Guaranteed Investment Certificate (GIC), alternately known as term deposits, is one of the safest means to financial security.

Offering short to mid-term savings goals, it keeps your money safe that you can access after the specified maturity period.

GIC is a type of Canadian investment, so only Canadian banks, life insurance companies, trust companies, and credit unions can issue it.

What Is a Guaranteed Investment Certificate (GIC)?

GICs are similar to a savings account where you can deposit money for a specific period and earn a guaranteed interest at an annual rate. The rate is higher for a long-term deposit.

Unlike a traditional savings account, the most common GIC type locks your money for a period of time that agreed upon by both parties. You cannot redeem the money until maturity, and doing so will result in a penalty.

GICs are much favored in the consumer level because:

  • There is no fee to invest in a GIC
  • Most of them beat the savings account interest rates offered by the banks
  • The investor is guaranteed to get the principal after the maturity period

Types of GICs to Choose From

Based on the interest rates, term lengths, and a few other variables, it is possible to categorize GICs into several groups. Let’s probe into some brief assessments to see which is the most suitable for you:

Fixed-Rate vs Variable-Rate

The interest rate won’t change throughout the term in a fixed-rate GIC. So, you will know how much you are going to get when the deposit matures. A variable-rate, on the other hand, does not offer any fixed rate. It depends on how the business – stock market, for instance – on which you invested is doing. You can score a higher or lower interest amount than you have expected.

Your initial investment will be secure in both cases.

Short-Term vs Long-Term

The typical length of short-term GICs is less than one year, while the long-term deposits could be between one and 10 years. The interest rate is comparatively lower for a short-term GIC but it could be a better option if you need to access the money after a short while or want to reinvest in something else.

Redeemable vs Non-Redeemable

Nonredeemable GICs demand you to pay a penalty and cut down the interest accumulated if you want to cash the money out before the agreed period. However, you can avoid the fine and get the interest for untimely termination if it is a redeemable GIC.

Registered vs. Non-Registered

Registered GICs are government-approved tax-sheltered savings plans and your income from the will not be taxable. Some of these plans are Registered Education Savings Plans (RESP), Tax-Free Savings Accounts (TFSA), and Registered Retirement Savings Plans (RRSP). The interests in non-registered GICs are taxable.

Foreign Currency

Some financial institutions including a few banks offer GICs in foreign currencies such as British Pounds, U.S. dollars, Euros. The interest rates are likely to lower than the Canadian GICs. These are non-registered accounts and the Canada Deposit Insurance Corporation (CDIC) insurance does not cover them.

Best GICs of 2018

GICs are a great medium for a secure investment. You can choose the term at your discretion without the fear of losing the principal amount.

We’ve curated a list of best registered and non-registered GICs below. For a more detailed comparison with more offers, check out CompareMyRates’ GIC rates comparison. Remember that rates are subject to change. You should always check the organization’s website or call their customer support to get the latest updates.

EQ Bank

Covered by CDIC via its parent bank Equitable Bank, it currently offers the best rates for long-term GICs. The interest rate for 5-year GIC is 3.5% and 4-year is 3.3%, which is the highest among all the available offers.

The one-year rate is 2.76%, which is closest to Oaken Financial, the instruction that offers the best rate for short-term GICs.

Oaken Financial

The CDIC-insured institution is a direct-to-consumer financial sect of Home Trust. It is currently offering some market-leading interest rates.

The one-year TFSA gives 2.8%, which is the highest among all the companies. If you purchase a GIC for $10,000, you will get $280 in interest after a year. The five-year rate is 3.4%, which is higher than other organizations except for the EQ Bank.

Motive Financial

All of the GICs of this organization are CDIC-insured, which means that your accounts are covered up to $100,000 even if the bank fails.

Its five-year GIC rate is 3.4%, which is equal to Oaken, and the 4-year rate is even better at 3.23%. You can also opt for non-registered GICs when you want to save for non-conventional goals such as a yacht.

Peoples Trust

It’s a small financial institution that provides great rates and products that people can put their trust in. They offer both registered and non-registered GICs and you can choose one according to your needs.

The short-term accounts are for 30 days to 364 days and the interest rates range from 1.3% to 1.5% for them. The long-term rates are better, ranging from 2.5% to up to 3.2%. The five-year rate for tax-free GIC, RRSP GIC, and non-registered GIC are same – 3.2%.

Meridian Financial

The Ontario-based company is currently offering the best TFSA rates. Open an account and enjoy 3% interest for the initial four months, which will be dropped to 1.4% after that period. Providing services across Canada, a Meridian account allows the customers to enjoy surcharge-free Meridian ABMs and unlimited transactions.

You will get 3.5% interest for a 5-year GIC in a provincially-insured account, which is a market-leading rate, equal to that of the EQ Bank.

Hubert Financial

The company is one of the most trusted in Manitoba for online savings. Sunova Credit Union operates the institution, which is covered by the Deposit Guarantee Corporation of Manitoba (DGCM).

It currently offers (for a limited time) 3% interest rate for 2-year TFSA, RRSP, RRIF, and non-registered GICs. The rate for a 4-year term is also good – 3.25%. You can even take mortgages with Hubert if you are a resident of Manitoba.

Omnia Direct

The company gives attractive offers for one-year non-registered GICs. Currently, its 3% rate for a one-year term is the highest of all the companies. If you invest $10,000, the interest amount will be $300 after the maturity period.

Now that you have an understanding of what GICs are and how to find the best one for you, it’s time to move onto the next step – getting a GIC.

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