GIC Types in Canada: Compare Investment Options

If you want to earn more interest than a typical savings account without risking your principal, guaranteed investment certificates (GICs) are worth considering. Offered by Canadian financial institutions, GICs are ultra-low-risk investments that provide guaranteed interest income, making them a reliable part of a diversified portfolio.

What are GICs? What benefits do they offer?

GICs are fixed-term investments that protect your initial deposit while paying interest. When you purchase a GIC, you lock in a term length and an interest rate up front. At maturity — the end of the term — you receive your original principal plus the guaranteed interest. Some GICs allow early redemption; others are locked in until maturity. The guaranteed nature of the return and the preservation of principal are what make GICs appealing for conservative savers.

Key benefits of GICs include:

1. Guaranteed returns

Fixed-rate GICs lock in an interest rate at purchase, so you know exactly how much the investment will yield and when you will receive payment, regardless of market fluctuations.

2. Low risk

GICs protect your principal—unlike stocks or many bonds—so you do not lose your initial investment. This capital preservation makes GICs suitable for short-term goals or when you need to safeguard savings approaching a target date.

3. CDIC protection

Most GICs held at Canada Deposit Insurance Corporation (CDIC) member institutions are eligible for CDIC coverage. In the unlikely event a member institution fails, CDIC can reimburse eligible deposits up to $100,000 per eligible category. Since April 30, 2020, deposits with terms over five years are also eligible for CDIC protection.

4. Flexible options

GICs are offered in many terms and structures: from 30 days to 10 years, with options for redeemable (cashable) and non-redeemable GICs, as well as market-linked products that combine principal protection with the potential to earn additional returns tied to market performance. You can also hold GICs in registered accounts such as RRSPs and TFSAs to benefit from tax advantages.

What types of GICs are available?

GICs come in several varieties to suit different needs and timelines:

Non-redeemable GICs

Non-redeemable GICs are locked in for the full term and typically offer higher interest rates than redeemable alternatives because you cannot access the funds early.

Cashable or redeemable GICs

Cashable GICs let you withdraw some or all of your investment after an initial waiting period, sometimes without penalty. They offer more liquidity but generally lower rates than locked-in GICs.

Market-linked GICs

Market-linked GICs protect your principal while giving you a chance to earn higher returns if an underlying market index performs well. Some market-linked GICs also include a minimum guaranteed return.

Short-term GICs

Short-term GICs (30 to 364 days) can be useful for near-term goals or for building a GIC ladder — a staggered series of GICs that maturity at regular intervals to provide both liquidity and improved yields over time.

Long-term GICs

Long-term GICs are available in increments up to 10 years and may offer higher rates for accepting a longer commitment.

How can GICs help you meet your financial goals?

GICs are a practical tool for meeting financial objectives, thanks to their predictable returns, variety of terms and redemption choices. They can help you:

• Stay disciplined with saving: GICs make it harder to dip into funds, helping you stay on track toward a goal.
• Protect your savings: As you near retirement or another target, GICs preserve what you’ve accumulated while still earning interest.
• Save for short- and long-term goals: Use different term lengths to time maturities for a vacation, education expenses or other milestones.
• Generate predictable income: A laddered GIC strategy can create regular cash flow for retirees or those who want steady interest payments.

How to reduce tax on GIC earnings

Interest earned on GICs is taxable unless held in a tax-advantaged account. To minimize or defer tax, consider holding GICs in registered accounts such as:

• Tax-Free Savings Accounts (TFSAs): Income and growth inside a TFSA are tax-free. Annual contribution limits apply.
• Registered Retirement Savings Plans (RRSPs): RRSP contributions can be tax-deductible, and investment income grows tax-deferred until withdrawal.
• Other registered plans: Accounts like Registered Education Savings Plans (RESPs), Registered Disability Savings Plans (RDSPs) and First Home Savings Accounts (FHSAs) may also hold GICs, offering specific tax or government-benefit advantages depending on the plan.

Grow your savings with GICs

GICs offer a safe, predictable way to grow savings without exposure to market downturns. With competitive interest rates available at times, it can be smart to take advantage of attractive rates and hold GICs inside registered accounts to reduce tax liabilities where possible. Whether you need short-term access or long-term stability, GICs can play a useful role in preserving capital and delivering steady returns.

Read more about GICs as an investment:

• Why GICs are a good addition to an RRSP or a TFSA
• Registered or non-registered GICs: Which should you buy?
• How does a TFSA work?
• TFSA contribution room calculator
• What’s my RRSP contribution limit?