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Guaranteed Investment Certificate

A Guaranteed Investment Certificate (GIC) might sound intimidating, but it is one of the most uncomplicated and underutilized financial tools.

What is a GIC?

A guaranteed investment certificate is a type of investment. Just like other investments, it pays out interest on the money you save for a set amount of time, like six months, one year, or five years. What makes GICs different is that, no matter what’s happening in the market, your original deposit is guaranteed to be returned. GICs also have better interest rates than regular savings accounts, but it is harder to access your money. You’ll have to pay a fine if you pull your money out early. Remember, the longer you leave your money in a GIC, the more you’ll earn.

How do GICs work?

With a GIC you deposit a chosen amount of money for a certain length of time, or term. Depending on the term and rate of the GIC you will earn interest. At the end of the term, your principal amount is returned to you along with the interest.

Most often, there is a penalty for withdrawing funds from a GIC early. That means it’s best to consider the money you invest in a GIC inaccessible until the end of the term. This makes it particularly important to think about what you want to do with the money when you choose a term length. Saving for something with a specific date? Choose a term that works. Want a better rate and don’t need your money right away? Go for a longer term.

The maturity date is the end of your term. At that point, you can either take out your money or extend the GIC.

Interest rates and GICs

Interest rates on GICs can be either fixed or variable. The interest rate, represented by a percentage, is called The Annual Percentage Yield (APY).

GIC interest rates differ depending on the financial institution. Some compound interest daily, while others only compound interest monthly. Some offer simple interest.

Free GIC calculators and other web resources can help you calculate your initial deposit earnings. Enter the terms for your GIC, and the calculator will show you the balance when it matures.

What are the unique features of a GIC?

GICs have unique features:

  • Both the principal and interest rate are guaranteed.
  • CDIC insures GICs under $100,00 with terms under five years.
  • Can be registered or unregistered.
  • Easily accessible because the minimum investment is only $500.
  • TFSA, RRSP, RRIF and RESP eligible.
  • There are no fees.
  • Some allow you to withdraw your money early without penalty.
  • Eligible to be bequeathed.

Types of GIC


The interest rate for these GICs remains the same for the entirety of the term.


GICs with a variable rate have interest rates that fluctuate. Usually, they move along with the financial institution’s prime rate.


These GICs allow the investor to withdraw money early without incurring any penalties.


The principle on market-linked GICs remains guaranteed as usual, but the interest earned fluctuates along with the stock market.


Some GICs are registered with the Canadian government. The big benefit of a registered GIC is that they are tax-free. They usually have age and contribution limits that you need to be mindful of.


These are the GICs outside of those that are registered with the government. While they are not tax-free, there are no restrictions in terms of age or contributions.

Pros and cons of GICs

It is important to know the advantages and disadvantages of GICs.


  • Most consider GICs one of the safest investments because the principle is guaranteed.
  • they offer a higher yield than savings accounts
  • Some offer tax benefits


  • Lack of liquidity. Funds are not easily accessible. Early withdrawals come with a penalty.
  • There is usually a minimum amount needed to buy a GIC.
  • Relatively low yield. GICs offer a higher yield than savings accounts, but other investments and asset classes offer more

What if you need to withdraw early?

The bank may penalize you if you withdraw money early from a GIC account. Checking the bank’s disclosure/agreement before opening your GIC account will say if there’s a penalty for early withdrawal. Generally, you’ll just have to give up at least some of the interest you earned on your deposit.

GIC alternatives

If a GIC isn’t for you right now, there are plenty of other options.

High-yield savings account

These savings accounts have a superior interest rate than regular savings accounts. They rarely require a minimum balance. You can take out your money whenever you want, unlike GICs.

Money market account

This account could give you a higher interest rate—though it’s variable, not fixed. Money market accounts might need a bigger minimum balance.


You can invest in bonds, stocks, mutual funds, index-based funds, etc. These investments usually have higher yields than GICs.

Tax-Free Savings Account (TFSA)

Tax-Free Savings Accounts are more liquid than GICs. They are all tax-free, though some rules around contribution limits must be followed.

Registered Retirement Savings Plan (RRSP)

The accessibility of funds in an RRSP is similar to a GIC, you will face heavy penalties for withdrawing early. All RRSPs offer good tax benefits.


When it comes to growing your money, you’ve got plenty of options, Guaranteed Investment Certificates being one of them. Make an informed decision that supports your savings goals.

If you’re not ready to invest yet because you’re struggling with debt, speak to one of our trained credit counsellors today! They can help formulate a plan to get you out of debt.

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