GIC Rates: How To Find The Best Ones

April 23, 2020
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A Guaranteed Investment Certificate (GIC) is a safe means of investment with little to no risk to show for, which are provided by banks and credit unions. When you deposit money into a GIC you agree to not use that money for a certain amount of time for which you get an interest rate. When using this type of investment, losses are only possible if the bank defaults.

However, the low risk comes with low rewards as you won’t be getting much returns in a short period of time. Patience is key when working with GICs, and knowing which GIC rates are the most beneficial will come in handy as they often vary with different time intervals. As a rule, the longer you invest your money, the greater the interest rate will be.

If you want to try GICs out for a short period of time, you can choose Oaken Financial, who offer the best short-term GIC rates on the market.

What Is A GIC?

Before we show you which GIC rates would benefit you the most, it’s important to have a modest understanding of what they are.

GIC stands for Guaranteed Investment Certificate, which as its name suggests, is a pretty safe option to invest in. When you deposit money in a GIC you get a guaranteed amount of income based on your investment. There are plenty of ways of going about it, so buckle up. We’re about to introduce you to every key detail you need to start investing in GICs. If you’re already familiar with GICs, you can skip the basics and scroll down to our list of the top GIC rates.

Related: If you’re looking for other low-risk methods of investment, you may want to check out Nest Wealth.

Guaranteed Income Certificates In A Nutshell

GICs are a secure way of investing your money. That’s all. They have almost no risk whatsoever, the only issues you might run into is if your bank defaulting. That’s highly unlikely, of course. With that being said, you can rest assured that your GIC will ensure that your money stays safe and stably growing. GICs offer a fixed interest rate at which your money will continue to grow for a set amount of time. Each bank offers its own GIC rates, so you’ll have to figure out which offer works best for your savings needs.

Why Would You Want A GIC?

Great question.

There are plenty of reasons why you would want to invest in them, and there are plenty to dissuade you from them. Therefore, it’s important to figure out what your longterm goals and plans are. If you’re the type of person who wants passive investment strategies with minimal financial risk, GICs are definitely for you. If you start investing in GICs early on, they’re a great way to make sure you have money for retirement. You won’t have to worry about any losses and will able to rest easy knowing that your money is slowly growing. GICs offer better rates than savings accounts most of the time, which is why they’re often a great complement to them.

That doesn’t mean GICs will always be more profitable than high-yield savings accounts, of course. If the general interest rate for savings accounts gets higher than your GIC rates, then you’d have been better off with savings accounts.

However, for the most part, GIC rates will beat savings accounts – hence, their importance. You’ll know exactly how much money to expect with this investment scheme as well, which gives it an edge over every strategy. Even savings accounts aren’t so predictable as their interest rates vary as the years go by.

GIC Rates yoreoyster

Related: If you’re looking for more ways to earn passive income, check out our ultimate list of 40 Ways To Earn Passive Income In Canada.

GICs Have No Fees

As if you needed another reason to start pouring money into them! You can leave your money invested for years on end without having to worry about any pesky fees. It makes them a safe and reliable means of storing money. The only deductions you might face are taxes on the money gained through interest, but we’ll cover that in a bit.

How Do GICs Work?

Banks and credit unions need money which they loan to their customers. The money you invest in them will be used for exactly that purpose. Since the banks or credit union that you choose to handle your GIC will get their money on time in an orderly manner, they don’t have any issues paying you back – on time – every year.

Everyone wins in this situation. You get a dedicated interest rate on your money for as long as you want (it’s recommended that you keep your investments to a maximum of 5 years). Meanwhile, the bank you work with can loan the money you give them at a higher interest rate and earn profits. They get money and you get security … and well, money, of course.

Most GICs rely on a fixed interest rate for the amount of time you want to invest in. Banks offer 1 to 5 years duration in which you can invest, with the interest rate rising as the duration is elongated.

One thing to keep in mind is that you cannot retrieve your money once it’s been invested in GICs. You’ll have to wait until the agreed time has passed.

Related: Cashback credit cards are also a great way to save money.

The Different Types Of GICs Available

Before we get into GIC rates, we’ll go over the different types that are available in the market. We can split them into fixed and variable GICs, and registered and non-registered GICs.

Fixed vs. Variable GICs

Fixed GICs have fixed GIC rates, which is to say, their interest rate won’t change throughout the term during which you’ve invested your money in them. They’re the safest option out there when it comes to investing, and will put your mind at ease.

Variable GICs, on the other hand, have fluctuating interest rates which are based on the market’s performance. They have a higher level of risk, which essentially comes with a greater reward. Assuming the market performs well during a certain year, you’ll get more than what you would have with a fixed GIC. However, a rough performance could mean that your investment won’t earn anything at all. Although variable GICs are also risk-free in that you won’t lose out on any of your money, not being able to keep up with the yearly inflation rate could still put you at a net loss. Whereas the usual, fixed, and long term GIC rates are able to not only keep up with inflation rates but can also turn over a profit without any loss in the long term.

Registered vs. Non-Registered GICs

Registered GICs would be the best way to save up for retirement as you’ll be protected from taxes. You’ll be able to save through RRSPs, TFSAs, RESPs, and the likes. None of the money gained through interest will be taxed, allowing you to reap maximum benefits from your GICs. This is especially beneficial since the rate of return is rather mild.

Non-registered GICs, on the other hand, will be taxed. Unlike registered GICs, they don’t have an investment limit. However, you will be taxed on all the interest you earn through them.

A Word Of Caution On GIC Rates

While GICs are a great way to invest, you should be alert to the downsides they bring. One of the main issues with the majority of GICs is that you won’t be able to withdraw your money before it’s matured based on the time that you agreed on. If you choose to do so, you’ll incur penalties. That’s why it’s always a great idea to have an emergency fund at the ready, so you won’t have to rely on your GIC investment for survival.

Another issue, is that the inflation rate might overtake the interest rate that you’re working with. That would result in a net loss and a lot of wasted time, that’s why you got to make sure you’re working with the best and most reliable GIC’s out in the market.

Now that you’re ready to work with GIC rates, Here are our best picks!

The Best GIC Rates In Canada

1. Innovation Credit Union

Innovation Credit Union has some of the best GIC rates on the market, hands down. For the minimum investment, it’s hard to find better rates elsewhere.

Minimum Investment$1,000
1 Year (Non-Registered)2.15%
2 Years (Non-Registered) 2.25%
3 Years (Non-Registered) 2.30%
5 Years (Non-Registered) 3.40%

2. Scotiabank

Scotiabank offers some of the best short term GICs available in the market. It’s a great place to start out if you feel like experimenting with GICs before you go all out with years-long investments. It has a fairly low minimum investment requirement as well, making the whole prospect open to almost every Canadian.

Minimum Investment$500
30-59 Days (RRSP)0.20%
90-119 Days (RRSP) 0.50%
180-269 Days (RRSP) 0.60%

3. Toronto-Dominion Bank

Toronto-Dominion shines when it comes to market growth GICs. They have variable outcomes, although there’s a minimum payout as well. The maximum returns you’re going to get depend on the market’s performance.

As you can see, the returns are much higher than your average GIC rate. However, if the market doesn’t perform well, your earnings could be lower than other GICs owing to the lesser Guaranteed Minimum Interest Return.

These are the rates for TD’s Canadian Banking and Utilities GIC:

Guaranteed Minimum Interest Return Maximum Return
2 Years (All Account Types) 0.25%4.00%
3 Years (All Account Types) 1.00%12.00%
5 Years (All Account Types) 1.75%15.00%

4. Access Credit Union

The best thing about Access Credit Union’s GIC is that it’s redeemable. You can get your money back whenever you need it. On top of that, the interest rate they’re offering is among the best in the market!

DurationAnnual Interest Rate
12 to 19 Months (Redeemable)1.90%
20 to 29 Months (Redeemable) 2.00%
30 to 39 Months (Redeemable) 2.05%
40 to 54 Months (Redeemable) 2.20%
55 to 60 Months (Redeemable) 2.30%

5. Oaken Financial

You’ll find some of the best short-term GICs in the country with Oaken Financial. They’re a lot better than Scotiabank in terms of rates, but have a higher minimum investment and aren’t registered.

Minimum Investment$1,000
30-59 Days (Non-Registered)1.85%
60-89 Days (Non-Registered)1.85%
90-119 Days (Non-Registered)1.85%
120-179 Days (Non-Registered)1.85%
180-269 Days (Non-Registered)1.85%
270-364 Days (Non-Registered)1.85%

Now That You Know Your GIC Rates

It’s important to realize that GICs aren’t something that will make you rich overnight. However, if you keep at them, they’ll turn into a great source of passive income sooner or later.

GICs offer fixed interest rates over an agreed amount of time. This may or may not be above the national interest rate, but is generally so. Over a matter of decades, GICs could be used as a means of preparing for retirement using registered accounts like TFSAs or RRSPs.

They aren’t too recommended for people who are in their prime and can afford to take risks, however. Most banks and credit unions offer GICs, but unless you prefer to play extremely safe, you’d be better off with investing alternatively. At the very least, we recommend that you don’t put all your eggs in one basket in the form of GICs and diversify your portfolio.

If you’re keen on trying out GICs, we believe that the best you can do is to start with short term investments, that way you won’t have your money locked up too long. With this in mind, your best option is, without a doubt, Oaken Financial GICs, which can go from 1 to 12 months and offer a flat fixed rate of 1.85%.

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