Guaranteed Investment Certificates (GICs) and term deposits are secured investments. This means that you get back the amount you invest at the end of your term. The key difference between a GIC and a term deposit is the length of the term. Term deposits generally have shorter terms than GICs.
Your right to information before you buy a guaranteed investment certificate or term deposit
Federally regulated financial institutions must give you key details before selling you a GIC or a term deposit. Specific requirements depend on the type of financial institution you’re dealing with.
They must disclose the required information to you in a manner, and using language, that is clear, simple, and not misleading.
At or before entering into an agreement with you, they must disclose information to you, such as:
- the term of the product
- how and when the principal is to be repaid
- how and when the interest, if any, is to be paid
- if the annual interest rate is fixed, the annual rate of interest
- if the interest rate is variable:
- how they calculate it
- the rate they use to calculate your interest rate (for example, the prime rate)
- the actual interest rate at the time they disclose the information
- how you may obtain the interest rate from them during the investment period
- any charges that apply and their impact on the interest payable
- the dates the investment period begins and ends (trust and loan companies only)
- if you can cash in the product before the investment end date. If you can, they must tell you how cashing it in early impacts the interest you earn
- if they can automatically reinvest your funds without a new agreement, details that would apply, including:
- whether it’s a fixed or variable rate, the actual interest rate, or the method to calculate it
- the investment period
- if you can cancel the product and how
- if they can amend a term or condition and if so in what circ*mstances
- any risk associated with the product, including if no interest accumulated
- whether or not the Canada Deposit Insurance Corporation (CDIC) will insure the product
When you enter into an agreement by telephone
Before you enter into an agreement for this type of product by telephone, they must provide you with the above information verbally. They must also provide the information in writing without delay after selling you the product.
When you enter into an agreement electronically or by mail
Before you enter into an agreement for this type of product electronically or by mail, they must provide:
- the information listed above in writing
- the telephone number of a person who is knowledgeable about the terms and conditions of the product
Your right to information if the terms and conditions change
Before changing any terms and conditions of the product you bought, they must inform you in writing about:
- the change
- any potential impact on the interest payable to you
Your right to information about the current value of a product
If you want to know your investment’s current value, they must disclose certain information to you without delay. This includes the principal (the amount you invested) and any interest earned on the day you made the request.
Your right to information about cashing in the product before its end date
Before cashing in this type of product before its end date, they must disclose to you:
- the amount of the principal and interest earned
- the amount of any penalty or charge for cashing in early
- the net amount you’ll receive
Your right to cancel an automatic renewal
A federally regulated financial institution may automatically reinvest your funds at the original investment’s end date. You can cancel this new investment within 10 business days of the start of the new term. If you’re in this situation, check the terms and conditions of your original agreement. You can also contact them for details on how to cancel the product.
Your right to information before renewal or rollover
Banks must disclose certain information about any renewal or rollover of a product or service they may provide to you.
If the product or service is for a term of more than 30 days, they’ll disclose the information:
- 21 days before the last day of the term, and
- 5 days before the last day of the term
For a product or service with a term of 30 days or less, they’ll disclose the information:
- 5 days before the last day of the term
The information they must disclose to you includes:
- the interest rate that will apply
- any charges or penalties that may apply
- particulars of your rights and obligations
- the period within which they’ll allow you to cancel the agreement
Learn more about other types of investment and the basics of investing.
When these rights apply to you
These rights apply when you’re dealing with a federally regulated financial institution like a bank or federal credit union.
Find out if your financial institution is federally regulated.
Learn more about how your banking rights are protected.
FAQs
Are there any risks to buying GICS? Even though GICs are a low-risk investment, there are certain factors that could derail any money-making potential. Your GICs may not keep pace with inflation – Regular GICs have a relatively low rate of return, which means they may not keep up with inflation.
How do guaranteed investment certificates work? ›
When you buy a GIC, you lend your deposit to the bank for a specific amount of time (the term). They return your deposit with any interest earned during the term. Typically, the longer the term, the higher the interest rate. Choose the amount you want to invest and your timeline before you buy a GIC.
What is a disadvantage of a GIC? ›
Cons: Low return – GICs are low-risk investments, which means they offer lower returns as opposed to stocks or mutual funds. Limited liquidity – Other than cashable GICs, your money is locked in for a set timeframe, which means you're unable to access your funds should you need them.
Should I put money in a GIC? ›
The bottom line. GICs can have a place in your investment portfolio, depending on what your savings goals are. If you're buying a home, they're a good option. But if you're trying to save for retirement and you're young, you might want to consider whether holding GICs makes sense.
What are the risks of certificates of deposit? ›
The biggest risk to CD accounts is usually an interest-rate risk, as federal rate cuts could lead banks to pay out less to savers. 7 Bank failure is also a risk, though this is a rarity.
Can I withdraw money from GIC? ›
If you have a redeemable GIC, you can cash in your investment before maturity, subject to certain conditions. If you have a non-redeemable GIC, you'll have to wait until the investment matures.
Is a GIC better than a high interest savings account? ›
High-interest savings accounts (HISAs) and guaranteed investment certificates (GICs) are reliable financial tools that can help boost your ability to save. GICs have higher interest rates but typically lock up your funds for months or years, whereas HISAs offer lower rates but much more accessibility.
What are pros and cons of guaranteed investment certificate? ›
What are the pros and cons of guaranteed investment certificate?
| Advantages | Disadvantages |
|---|
| Fixed term and interest. You will know exactly when your GIC will expire and how much interest you'll earn at the end of the term. | Low returns. While GICs are safe, the returns are very low compared to other kinds of investments. |
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For some people, it can be worth putting money into a CD. If a person is seeking a riskless investment with a modest return, CDs are a good bet—you'll earn a higher rate than you would with a checking or savings account, but you'll have to commit your funds for a fixed period.
Are GIC good for seniors? ›
GICs are an ideal investment toward the end of your career and during early retirement because they offer better returns than you can get from a savings account with almost zero risk. Long-term GICs can also help you set aside money for later-in-life expenses.
GICs are illiquid
The most common reasons for wanting the flexibility to sell at any time are unexpected expenses or to rebalance a portfolio during a bear market for stocks. GICs are locked-in and cannot be sold before maturity. While cashable GICs are available, they come with less attractive rates.
What is a better investment than GIC? ›
Bonds rebounded in the years following negative returns, earning more than double the return of GICs in 1995, 2000, 2014 and 2023.
Is a 10 year GIC a good idea? ›
Frequently asked questions about investing in a GIC
Typically, GICs are ideal for short-term investments, such as up to five years. However, they can also be used for longer-term (five to 10 years) investments as well if it's a better fit for your goals, especially if you're using a laddering strategy.
Who has 5% GIC rates? ›
Canadian GIC rates comparison
| Provider | 1-year GIC | 5-year GIC |
|---|
| ICICI Bank Canada GICs | 5.00% | 4.50% |
| Ideal Savings | 5.25% | 4.50% |
| LBC Digital GICs | 5.00% | 4.50% |
| MCAN Wealth GICs | 5.50% | 4.75% |
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The Best GIC Rates Currently Available in Canada
- Hubert Financial and Ideal Savings – 5.35% (1-year)
- EQ Bank – 5.35% (1-year)
- Saven Financial – 5.45% (1-year)
- Peoples Trust Bank of Canada – 5.40% (1-year)
- Achieva, Motive and Outlook Financial – 5.20% (1-year)
- Wealth One Bank of Canada – 5.05% (1-year)
These funds do not offer easy access to invested cash and capital invested will be locked in for various time periods. Generally, a capital guarantee fund will require that an investor remain invested for a certain number of years, making these investments best for investors with a long-term investment goal.
Why is it time to move out of GICs? ›
The bottom line is that GICs still hold considerable appeal for cautious investors. However, GICs have historically not been a great investment. Over the past 20 years, they have barely kept pace with inflation. Right now, other assets seem poised to produce superior returns.
