Comprehensive Guide to Guaranteed Investment Certificates (GICs) and Term Deposits in Canada

What Is a GIC?

A Guaranteed Investment Certificate (GIC) is a Canadian investment product where you deposit money with a financial institution for a fixed period and earn interest. Your original investment and interest are guaranteed, making GICs low-risk.

How Do GICs Work in Canada?

• You invest a lump sum for a fixed term (e.g., 1-5 years)
• You earn a guaranteed interest rate
• At maturity, you receive your original deposit plus interest

What Is a Term Deposit?

Term deposits are similar to GICs and are often used interchangeably. The main difference is that term deposits may offer more flexible terms.

Top GIC Providers in Canada

• Online banks: EQ Bank, Oaken Financial, Motive Financial
• Credit unions
• Traditional banks with promotions: TD, RBC, BMO, etc.

Uses of GICs in Canada

• Short- or medium-term savings
• Retirement and education planning
• Safe, low-risk capital preservation

Disadvantages of GICs

• Lower returns than equities
• Limited liquidity (locked-in funds)
• Fully taxable interest (outside registered accounts)
• May not keep pace with inflation

GIC Accessibility

• Non-redeemable GICs: No early access
• Redeemable GICs: Withdrawable with lower rates
• Partial refunds only in rare cases

Are GICs Tax-Free?

• Yes, in registered accounts (TFSA, RRSP)
• No, in non-registered accounts (interest is taxable)

When Is a Good Time to Buy a GIC?

• When interest rates are high
• When market conditions are uncertain

Transferring GIC Funds

• At maturity: Transfer to bank account or reinvest
• For registered accounts: Use proper forms to avoid penalties

Is It Possible to Lose Money in a GIC?

Generally no, unless withdrawn early or purchased from a non-insured institution.

What Happens if the Bank Fails?

• CDIC covers up to $100,000 per category at member institutions
• Credit union GICs are provincially insured

Interest Payment Options

• Annually, monthly, or at maturity
• Compounded or simple interest

GICs at Death

• Interest earned is reported on the final return
• GIC forms part of estate unless beneficiary is named in a registered account

Beneficiaries and GICs

• Allowed in registered accounts (e.g., TFSA, RRSP)
• Not applicable for non-registered GICs

Tax Implications on Withdrawal

• TFSA: Tax-free
• RRSP: Taxed at withdrawal
• Non-registered: Fully taxable annually

How to Reduce Taxes on GICs

• Use TFSAs and RRSPs
• Consider spousal RRSPs
• Ladder your investments for better tax timing

Alternatives to GICs

• High-interest savings accounts
• Bonds and bond ETFs
• Dividend-paying stocks
• GIC ladders for liquidity

Are GICs Good for Seniors?

Yes. They offer:

• Principal safety
• Predictable income
• Low maintenance investment

Your Rights as a GIC Holder

• Clear disclosure of all terms and conditions
• CDIC/provincial insurance protection
• Guaranteed return of principal and agreed interest
• Access to financial advisor support for planning