A secure way to grow your money with zero market risk
What Is a GIC?
A Guaranteed Investment Certificate is a deposit investment product offered by Canadian banks and trust companies. When you buy a GIC, you lend your money to a financial institution for a set period, called the term.
In exchange, the institution guarantees to return your full principal plus a fixed interest rate. Terms range from 30 days to 10 years, with longer terms typically offering higher rates.
The “guaranteed” part means exactly that: you will get back every dollar you invested, regardless of what happens in financial markets. This makes GICs a cornerstone of conservative investing strategies in Canada.
Most GICs require a minimum investment of $500, though some products start at $1,000. There are generally no fees associated with GICs, unlike many mutual funds or brokerage accounts.
How GICs Work
You choose a term length and deposit your money. The financial institution locks in an interest rate for that term. At maturity, you receive your principal plus all accumulated interest.
Interest can be paid in different ways depending on the GIC type. Some pay at maturity, others pay annually, semi-annually, or monthly. More frequent payments typically result in slightly lower offered rates.
For example, if you invested $2,000 in a 2-year GIC at a 2.00% interest rate with annual compounding, you would have $2,080.80 at maturity. The longer the term, the higher the rate tends to be.
- Your principal amount is 100% guaranteed by the issuing institution
- Interest rate is fixed at purchase and does not change during the term
- Terms are flexible, ranging from one month to ten years
- Minimum investment typically starts at $500
- No management fees or annual charges apply
Types of GICs
Canadian financial institutions offer several GIC variations to match different goals and liquidity needs. Understanding these options helps you choose the right product for your situation.
Non-Redeemable GICs
These are the most common type. You lock in your money for the full term and cannot withdraw early. In exchange, you receive the highest interest rates available for GICs.
Terms range from 30 days to 10 years. The longer you commit, the better the rate. Non-redeemable GICs work well when you know you won’t need the funds before maturity.
Cashable GICs
These GICs allow you to withdraw your money before the end of the term, typically after a short waiting period. The trade-off is a lower interest rate compared to non-redeemable options.
Common terms are 1 year or 3 years. If you cash out early, you may receive a reduced interest rate or no interest if withdrawn within the first 30 days, depending on the specific product.
Market-Linked GICs
Also called equity-linked or index-linked GICs, these products tie returns to the performance of a stock market index such as the TSX. Your principal remains guaranteed, but interest payments vary based on market performance.
These GICs often include a minimum guaranteed return, such as 0% or 1%, plus the potential for higher returns if the linked index performs well. If the market declines, you get back your principal plus the minimum guarantee.
U.S. Dollar GICs
If you hold U.S. dollars and want to earn interest without converting to Canadian currency, U.S. dollar GICs let you deposit and earn in USD. Terms typically range from 1 day to 5 years.
These products are useful for Canadians with U.S. income, property, or planned expenses south of the border. Minimum investments are usually $1,000 USD.
Registered GICs
You can hold GICs inside registered accounts like TFSAs, RRSPs, RESPs, RIFs, or RDSPs. When held in a TFSA, your interest grows tax-free. In an RRSP, growth is tax-deferred until withdrawal.
If you hold a GIC in a non-registered account, the interest you earn is taxed as income each year, even if the interest has not been paid out to you yet.
| GIC Type | Liquidity | Rate Level | Best For |
|---|---|---|---|
| Non-Redeemable | Locked until maturity | Highest | Long-term goals with no early access needed |
| Cashable | Early access allowed | Lower | Emergency funds or flexible savings |
| Market-Linked | Locked until maturity | Variable (0% minimum) | Conservative growth with some market exposure |
| U.S. Dollar | Varies by product | Competitive USD rates | U.S. dollar holders avoiding currency conversion |
GIC Safety and Insurance
GICs offered by members of the Canada Deposit Insurance Corporation are eligible for deposit protection up to $100,000 CAD per insured category at each member institution.
This means both your principal and any interest earned are protected if the financial institution fails. Coverage applies separately to different account types, such as individual accounts, joint accounts, RRSPs, and TFSAs.
GICs purchased through provincial credit unions are similarly covered by each province’s respective deposit insurer. Protection limits and rules vary by province.
- CDIC coverage applies only to eligible deposits at CDIC member institutions
- Maximum coverage is $100,000 per depositor, per insured category, per institution
- GICs with terms longer than 5 years are not eligible for CDIC insurance
- U.S. dollar GICs held at Canadian institutions may be eligible for separate coverage
- Coverage is automatic for eligible deposits, no application required
GICs vs Other Investments
GICs sit at the conservative end of the investment spectrum. Understanding how they compare to other savings and investment options helps you decide where they fit in your portfolio.
GICs vs High-Interest Savings
High-interest savings accounts offer full liquidity, you can withdraw anytime without penalty. GICs lock in your money but typically pay higher rates, especially for longer terms.
Savings account rates can change at any time based on the institution’s discretion. GIC rates are fixed for the entire term, providing certainty. For more on savings options, review our guide to best savings accounts.
GICs vs Mutual Funds
Mutual funds invest in stocks, bonds, or other securities. Returns fluctuate with market performance, and you can gain or lose principal. GICs guarantee your principal and provide predictable returns.
Mutual funds typically charge management fees, often 1% to 2% annually or more. GICs have no fees. Over time, mutual funds may deliver higher returns, but they carry higher risk.
GICs vs Stocks
Stocks can provide significant growth potential but come with volatility. Share prices can fall, causing you to lose money on your investment. GICs are stable and protect your principal at all times.
Stocks pay dividends that may fluctuate or be cut entirely. GIC interest is contractually guaranteed. For risk-averse investors or those with short time horizons, GICs offer security that stocks cannot match.
| Feature | GIC | High-Interest Savings | Mutual Fund |
|---|---|---|---|
| Principal Protection | 100% guaranteed | 100% guaranteed | Not guaranteed |
| Return | Fixed rate | Variable rate | Variable, can be negative |
| Liquidity | Locked (non-redeemable) | Immediate access | Accessible, may have fees |
| Fees | None | None or minimal | 1% to 2%+ annually |
| Risk Level | Very low | Very low | Low to high |
Who Should Consider GICs
GICs work best for specific financial situations and investor profiles. They are not the right choice for everyone, but they excel in certain scenarios.
- Conservative investors who prioritize capital preservation over growth
- Savers with a specific goal and timeline, such as a down payment in two years
- Retirees seeking predictable income with zero market risk
- Those building an emergency fund who can lock away a portion for higher rates
- Investors balancing a portfolio by adding low-risk, fixed-income assets
For example, if you are saving for a home purchase in three years, a 3-year non-redeemable GIC locks in a rate and ensures your down payment grows without market risk.
- Investors seeking high growth potential should explore equities or equity funds
- Those who may need their money before the term ends should choose cashable GICs or savings accounts
- Anyone looking to beat inflation over the long term may find GIC rates insufficient
- Investors comfortable with volatility can often earn better returns in diversified portfolios
Before choosing a GIC, consider the interest rate, term length, penalties for early withdrawal, minimum investment, payment options, taxation, and insurance coverage. Rates and terms may vary by financial institution.
Compare current options by reviewing our savings account comparison tool to see how GICs stack up against other safe savings products.
Bottom Line
Guaranteed Investment Certificates deliver what their name promises: guaranteed principal, guaranteed interest, and guaranteed peace of mind. For Canadians who value safety and predictability, GICs are a proven tool to grow savings without market exposure.
While GICs won’t deliver stock-market returns, they also won’t keep you up at night worrying about losses. They fit naturally into conservative portfolios, retirement planning, and goal-based savings strategies. With CDIC insurance covering eligible deposits up to $100,000, the risk is minimal.
If you’re ready to explore GIC options, start by comparing rates across institutions and matching term lengths to your financial timeline. Sign up for our newsletter to receive updates on the best GIC rates and savings strategies delivered to your inbox.
