Guaranteed Investment Certificate (GIC)

A GIC is a type of investment offered by Canadian banks and credit unions where you deposit a fixed amount of money for a set period of time. In return, the institution guarantees your principal (the amount you deposited) and pays you a predetermined interest rate. When the term ends, you get your money back plus the interest.

How it works

GIC terms typically range from 30 days to 5 years. Generally, the longer the term, the higher the interest rate. Some GICs are cashable or redeemable, meaning you can take your money out early (usually with a lower rate). Others are locked in, meaning your money is tied up until the term ends.

GICs can be held inside a TFSA, RRSP, FHSA, or non-registered account. The interest income is fully taxable in a non-registered account, but tax-sheltered inside a registered account.

Why it matters

GICs are one of the safest investments available, and they can be a good starting point if you’re new to investing. Our guide on how much you need to start investing covers this in more detail. Your principal is guaranteed, and if the institution is a CDIC member, deposits up to $100,000 per category are insured. The tradeoff is that your returns are lower than what you might earn in stocks or ETFs over time. GICs can make sense for money you’ll need within a few years, or as the conservative portion of a broader portfolio. They’re also useful when interest rates are high and you want to lock in a rate before it drops.

A concrete example

You put $10,000 into a 1-year GIC at 4.5%. When the term ends, you get your $10,000 back plus $450 in interest. If that GIC is inside your TFSA, the $450 is completely tax-free. In a non-registered account, the $450 would be added to your taxable income for the year.