Guaranteed Investment Certificates (GICs) | CIBC (2024)

FAQs

What is guaranteed investment certificate GIC Canada? ›

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.

A GIC (guaranteed investment certificate) is a safe and secure investment with very little risk. You don't have to worry about losing your money because it is guaranteed. A GIC works like a savings account in that you deposit money into it and earn interest on that money.

Disadvantages of GICs

Not all investment returns are taxed equally, and unlike capital gains and dividends, interest income earned from GICs is fully taxable in the year received. GICs typically offer very low returns, especially after accounting for taxes and inflation, which can erode your purchasing power.

Understanding Canadian Guaranteed Investment Certificates

The GIC works much like a certificate of deposit in the U.S. In the case of GICs, you deposit money in the bank and earn interest on that money.

GICs are sometimes called funding agreements.

Guaranteed investment certificates are sold by Canadian banks, credit unions and other financial institutions and can be insured by the Canadian Deposit Insurance Corporation (CDIC). People in the U.S. may be able to buy GICs if they have an account through a Canadian bank.

Yes, your Guaranteed Investment Certificate (GIC) principal and interest is covered, no matter where you reside.

An alternative to GICs is high-interest savings account (HISA) which do offer good liquidity. However, HISAs ETFs usually offer lower yields than both diversified bond funds/ETFs and GICs, although over a few time periods, HISAs, and even GICs, have offered higher yield than a diversified bond fund or ETF.

Are GICs a good idea now? ›

A year ago, GIC rates were just starting to rise but were still less than 3%. The reason they are so much higher now is worth considering. The January 2023 year-over-year inflation rate fell to 5.9%, after rising at a 6.3% rate for 2022.

The minimum amount you can invest is typically $500. There is no maximum limit to the amount you may invest in a GIC. Most GICs pay a fixed rate of interest for a set term, such as six months, one year, two years or up to 10 years. The term ends on the maturity date.

In nominal terms, yes. At the end of the term, your GIC would have paid you $200 interest, however, in 'real return' terms the investment generated a loss. While you made $200 in interest you lost $300 to inflation, which works out to a $100 loss in purchasing power.

Disadvantages of GICs

You'll need to tie up your money for the entire term if you want to get the full return. The interest rate offered on GICs may not beat inflation. You'll be taxed on the interest earned if the GIC is held outside of a registered account.

Since GIC earnings are considered “interest,” they're taxed at your marginal tax rate—the rate at which your last dollar earned is taxed. Unlike capital gains or dividend income from stocks, the government does not provide tax breaks for interest income.

Outperformance of bonds vs GICs has typically been material

With a yield of nearly 6% for Canadian investment grade bonds and potential upside to prices in a falling interest rate environment, it's possible that the outperformance of bonds vs GICs could be material in 2023.

Winner: CIBC. Every bank requires the student to invest CAD $10,000 minimum in their GIC. That's because this is the minimum amount required to apply for a study permit through the Student Direct Stream. However, only one bank lets students open their GIC for free, and that's CIBC.

For 1 to 5 year Bridgewater Bank GICs, interest is paid depending on the interest payment option you select. On GICs with terms of one year or longer, interest is calculated daily on the principal amount and can either be paid monthly, annually, or compounded annually and paid at maturity.

Most guaranteed investment certificates (GICs) in Canada are, not surprisingly, denominated in Canadian dollars. However, some financial institutions also offer GICs in U.S. dollars and even other foreign currencies. Here's a quick look at why you might consider buying one of these GIC products.

GICs are considered a safe investment – unlike with stocks, you don't risk losing your money. And even if something were to happen with your bank, the federal government – through the Canada Deposit Insurance Corp. (CDIC) – guarantees the GIC's combined principal and interest payments up to $100,000.

Can I live in Canada if I am a US citizen? ›

Yes, you can live in Canada if you are a U.S. citizen—and actually, unless you actually apply for citizenship in Canada, you will still be considered an American citizen, even if you are a permanent resident of Canada.

Basics of Canada taxes for U.S. citizens

Do expats pay taxes in Canada? As a U.S. citizen working and living in Canada, yes, you may also have to file Canadian taxes: Canadian tax residents are taxed on all income, regardless of where it's earned.

Most visitors can stay for up to 6 months in Canada. At the port of entry, the border services officer may allow you to stay for less or more than 6 months.

Can Non-US Citizens open bank or brokerage accounts? Yes, they can. Even if they don't live in the US. They can do it from home.

Is a GIC required for a Canadian student visa? International students applying for a study permit to Canada through the Student Direct Stream (SDS) are required to have a minimum GIC of $10,000 CAD from a participating Canadian financial institution such as the Royal Bank of Canada (RBC).

You can buy GICs online through WebBroker for any investment account including RSP, TFSA, RIF and more.

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.

How to Choose: If you're looking for a safe investment with a guaranteed return, GICs are a good option. But if you're willing to take on more risk in exchange for the potential for higher returns, mutual funds may be a better choice.

Will GIC rates go up if interest rates go up? ›

When interest rates go up, so do consumers' expectations for interest rates on savings accounts. Recent hikes may mean slightly higher rates on savings accounts and guaranteed investment certificates (GICs) down the road.

The good news is that interest rates likely won't be going up much, if at all, in 2023.

For medium and long-term goals, few savings options are as effective as GICs, many of which offer higher interest rates in exchange for lock-up periods that ensure you're committed to investing. Their guaranteed returns keep your funds safe, while the higher interest rates may help keep you ahead of inflation.

What the bond and GIC markets are predicting, essentially, is that interest rates will fall as the economy slows and the central bank wrestles inflation to the ground. That's why you're getting a lower, not higher, yield if you lock in a GIC for four or five years compared with a one- to three-year GIC.

For example, certificates of deposit (CDs), money market accounts, municipal bonds and Treasury Inflation-Protected Securities (TIPS) are among the safest types of investments. Certificates of deposit involve giving money to a bank that then returns it with interest after a certain period of time.

The maturity date defines when the GIC agreement ends, or matures. The full amount of the original investment will be returned, together with any remaining interest due at maturity. In addition to fixed-term GICs, you can also choose a cashable / redeemable GIC.

To withdraw funds, write to us using this secure form or fill out the form on the Help and Contact page in the left menu of your online bank. If you have a redeemable GIC, you can cash in your investment before maturity, subject to certain conditions.

Guaranteed Investment Certificates (GICs) rates reflect average GIC rates from chartered banks. Note: “Real return” reflects nominal return less marginal tax rate at 40% and inflation rate. Unlike mutual funds, the returns and principal of GICs are guaranteed.

How much GIC do I get every month? 2000 CA$ will be transferred from your GIC account to your student bank account when you arrive in Canada. You will receive a monthly payment of 667 CA$ plus any interest amount for 12 months from the remaining 8000 CA$ in your GIC Account.

The maturity date defines when the GIC agreement ends, or matures. The full amount of the original investment will be returned, together with any remaining interest due at maturity. In addition to fixed-term GICs, you can also choose a cashable / redeemable GIC.

When should I get GIC certificate? ›

To get your GIC, you will need to make a short-term liquid investment with a Canadian bank, usually for up to a year. The recommended amount of the investment is CAD 10,000. You will be able to access this only once you are in Canada. This investment covers the living expenses for your first year in Canada.

Cashing in a GIC early

Cashable or redeemable GICs – You can cash them in early, before the maturity date, without paying a penalty. Regular GICs – You will likely have to pay a charge or penalty for taking your money out early. Even if you only need some of your money, you might have to take it all out.

In the case of a GIC, all the interest earned is taxed at a person's so-called marginal rate. Your marginal rate is the tax bracket you fit into given your pre-tax annual income. Tax is payable to both the federal and provincial governments. For federal and provincial tax rates, see the CRA's website here.

Unlike capital gains, 100% of any GIC interest income earned is fully (i.e. 100%) taxable, so there's no tax advantages to holding GICs in non-registered accounts.

This GIC Will Automatically Renew At Maturity

But if you don't take action when a GIC matures, just what happens to your money? Usually, if you fail to instruct the financial institution to do something when your GIC matures, it will be rolled over to a similar investment product at the prevailing rate.

GIC or Guaranteed Investment Certificate is a short-term liquid investment for a period of one year offered by Canadian banks with a guaranteed rate of return. It is for Indian students who aspire to study in the SPP (Student Partners Program) colleges in Canada.

The remainder of the GIC will continue to earn its regular rate of interest. Partial withdrawals are subject to a $1000 minimum withdrawal amount and a minimum remaining balance of $1000. Your request will be completed within 1 business day. Log in to online banking to verify your withdrawal.