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Types of GICs in Canada and how they Work

Written by Jessica Steer
Reviewed by Emily Gardner
When it comes to investing in Canada, there are plenty of ways to diversify your portfolio. It’s important that you offset your risky investments with less risky or safe investments. One of the methods investors choose to do this is by investing in GICs.
Table of Contents

    GICs, also known as Guaranteed Investment Certificates, are one of the many ways in Canada that you can invest your money. Unlike other types of investments, GICs offer a guaranteed return and allow you to save your money faster. That said, you won’t have access to your funds right away, either. 

    How GICs Work

    GICs are investments that banks and trusts issue. These types of investments are principal-protected and offer a guaranteed return rate over a specified period of time. While the return is occurring, your investment is locked in an account that you can’t break without penalty. As long as you leave your funds in the account, then you can earn interest at the guaranteed rate. While investors don’t often choose this investment as their only form of earning, it’s a great way to offset their portfolio or save for a specific purchase. 

    Different Types of GICs

    Before you start investing in GICs, it’s important to determine what type of GIC you would like to invest in. In Canada, there are quite a few different GICs to choose from. We’ll go over each one and how they work. 

    Market Growth GICs

    Marget growth GICs are a good idea for those looking to potentially earn a large return on their investment without risking the principal amount. With these types of GICs, instead of investing with a guaranteed rate, you have the potential to earn more by capitalizing on the growth potential of the different stock markets while still having a guaranteed rate of return. 

    Cashable GICs

    One of the most popular types of GICs is the cashable GIC. This is a one-year GIC that you can cash out after 30 days with no penalties. Most banks will automatically renew these GICs after they’ve reached maturity unless you choose to cash them out before then. 

    Non-Cashable GICs

    Non-cashable GICs are GICs that are locked in for a specified period of time that you’re unable to cash out before they reach maturity. Once they’ve reached maturity, you can decide to pull them out or reinvest them. Some financial institutions also refer to these as non-redeemable GICs. 

    While non-cashable GICs aren’t as convenient as cashable GICs, they do have a greater return rate than cashable GICs. They also have different terms you can choose, so you don’t have to lock in for 5 years. You can choose to lock in for just one year, instead, or any other terms your financial institution may be offering. 

    Fixed Rate GICs

    Fixed-rate GICs are one of the most predictable. Just like all GICs, your principal investment is protected and locked in. With fixed rates, though, the rate of return is the same throughout the entire term. Because of this, the moment you choose to invest your money in one of these, you’ll already know exactly how much interest you’ll have earned once your investment has reached maturity. 

    Escalator GICs

    With escalator GICs, you won’t know how much will be in the GIC once it reaches maturity. These types of GICs have different interest rates for each year of your investment term. Escalator GICs are ideal for those investing in long-term GICs because the interest rate rises every year. That said, the first year or two of an escalator GIC isn’t very competitive with one or two-year fixed-rate GICs, so they aren’t for everyone. 

    Variable Rate GICS

    Variable interest rate GICs are one of the riskier types of GICs. This is because the interest rate you hold in the GIC varies based on the market rate. For this reason, you could end up earning a lot or earning nothing. However, at no point will you lose your principal investment. That said, whether or not you can cash out early without penalty depends on whether your GIC is cashable or non-cashable. 

    Types of GICs With the Top 5 Banks

    When you’re looking into investing in GICs, it’s important to remember that the types of GICs available and the rate at which they’re invested depends on the financial institution. Let’s take a look at the top 5 banks and what they’re currently offering. It’s important to note, though, that no matter which bank you choose, they all offer competitive GIC rates based on your financial institution’s prime rate. 


    With RBC, also referred to as the Royal Bank of Canada, there are three GIC families that you can choose from. These are Guaranteed-Return GICs, Interest-rate-linked GICs and Equity-Linked GICs. 

    With the guaranteed return GICs, both your principal and interest payments are guaranteed. That said, you do have to hold the GIC until maturity. They have different terms and competitive interest rate options available. They even offer escalator GIC options. 

    When it comes to interest-rate-linked GICs, you have a 100% guarantee on your principal and interest as long as you keep the GIC for the full term. If the interest rate increases, then you earn a higher interest rate. If your rate decreases, then you’re able to cash out your GIC and reinvest it in something else. 

    Equity Linked GICs make it so your investment is set up to grow. Your principal payment is protected when you keep the GIC for the full term, and you get the choice between the full minimum return or unlimited upside potential. 


    If you bank with TD Canada Trust, another option is to choose one of their GICs. Just like RBC, they have a few different options to choose from. 

    Type of GICAbout the GIC
    Market Growth GIC3 or 5-year terms
    Non-redeemable and equity-linked
    Minimum investment amount of $500
    50% maximum return on a 5-year term
    TD Special Offer GICFixed-interest rate
    Minimum investment amount of $500
    Term from 100 days to 3 years
    Cashable or non-cashable
    Cashable GIC30 days to 5-year terms
    Minimum investment amount of $500
    Registered on non-registered
    Non-Cashable GIC30 days to 5-year terms
    Minimum investment amount of $500
    Registered or non-registered
    Fixed-rate and non-redeemable
    TD US Dollar GIC and Term Deposits1-day to 5-year terms
    Minimum $1000 USD
    Cashable or non-cashable
    Fixed-rate and non-registered


    BMO has a variety of options to fit your needs if you’re looking for a GIC. They offer market growth GICs, cashable and non-cashable GICs, and US dollar GICs (a form of foreign currency GICs). 

    Unlike other banks, in order to get a GIC, you have to book an appointment with the bank. From there, an advisor will help you pick the right GIC and term for you. You can even invest your GIC into a TFSA or RRSP in order to maximize your tax benefits. While most choose to put mutual funds into these accounts, GICs are a great alternative.


    With CIBC, there are also a wide variety of GICs to choose from. Keep in mind that with any GIC, the GIC interest rates change as the market interest rates fluctuate, but the standard terms stay the same. 

    Type of GICAbout the GIC
    Bonus Rate GICsNon-redeemable
    Minimum $1000
    Registered or non-registered
    Flexible GICs1-year term 
    Minimum $1000
    Registered or non-registered
    Market Linked GICs2 to 5-year terms
    Minimum $500
    Registered or non-registered
    Variable Rate GICs1-year term
    Minimum $1000
    Variable rate
    Easy Builder GICs1 to 5-year terms
    Minimum $2500


    With Scotiabank, there are also quite a few choices when it comes to GICs. They offer cashable GICs, personal redeemable and non-redeemable, as well as market-linked. The differences between these are that the market-linked is the only one affected by the stock market, the cashable and personally redeemable have the most flexibility, and the non-redeemable and market-linked have the highest returns. 

    Each type of GIC they offer has a variety of percentage rates and terms to choose from. In order to get your best rate, you should speak with an advisor to get the best GIC for you. 

    Registered Vs Non-Registered GICs

    You may have noticed that as we talk about the different types of GICs, some of these are registered or non-registered. Others have the option for either or, but what exactly does this mean? Well, it’s actually less complicated than you think. 

    If you you choose to hold a GIC in a registered account, this means that you’re investing your money into an RRSP (Registered Retirement Savings Plan), TFSA (Tax-Free Savings Account), RESP (Registered Education Savings Plan) or other type of registered account. The reason you may choose to invest in a registered account is because of tax savings. Each of these types of accounts is registered with the government and has annual limits. What you put into your RRSP is considered to be tax-free and won’t be taxed until you take out the funds. With a TFSA, what you earn on your funds will not be taxed. 

    If you choose to put your funds into a non-registered account, this means that you pay tax on the money you invest. It’s invested into a standard account. However, you're less likely to be penalized for taking out the funds as well. It all depends on the type of non-registered GIC you choose. 

    GICs and TFSAs

    Investing your GIC into a TFSA is a popular option. This is because TFSAs are government-registered accounts that allow you to deposit GIC investments and other investments and avoid paying tax on the interest you earn. When you invest GICs in a standard account, you tend to be heavily taxed on the gains since it’s considered investment income. 

    Unlike with RRSPs, when you withdraw money from your TFSA, you don’t have to pay taxes on those funds. That said, there is an annual limit when it comes to investing in TFSAs. That only includes the original amount you invest; however, it doesn’t include any gains you earn on your investments. 

    Pros and Cons of GICs

    When you’re deciding whether or not to invest in a GIC, it’s important to consider both the pros and cons. Just like with any other type of investment, GICs might not be for everyone, so think carefully before making a decision. 


    The reason many choose to invest in GICs is because they’re a safe, low-risk investment. This is because your initial investment is protected, and up to $100,000 is eligible to be protected by the Canada Deposit Insurance Corporation. They’re also super simple to understand and don’t require any maintenance. There are also no fees that are normally charged with GICS, which also makes them attractive to investors. 


    While there are very few cons associated with GICs, there are reasons why investors sometimes shy away from them. This is because they often have a lower return than other types of investments. Most forms of GICs also don’t allow you access to the funds until the term is finished, and if they do, there could be a penalty involved. However, it does make a difference on the type of GIC you invest in and if they’re fixed or variable rates. 

    How GICs Pay Interest

    How the interest is paid on your GIC depends on how long of a term you have. On investments that are at least a year or longer, the interest is calculated daily based on the principal amount. How that interest is paid out is based on your financial institution and the type of GIC that you choose. That said, they can either be paid monthly or yearly or compounded annually and then paid out at the end of the term. 

    For short-term GICs that are less than a year, the interest is calculated daily. Unlike longer-term GICs, though, the interest on these is paid out at your maturity date. Those that are for a year have interest paid annually. No matter what term you choose for your GIC, though, you earn compound interest, not simple interest. However, the longer you keep the GIC, the more compounding interest you earn.

    GICs for International Students

    In Canada, many major banks and credit unions allow international students to deposit funds into a GIC when they come to Canada. Once they arrive, they’ll have access to a portion of these funds as well as the interest earned. Then, over a specified period of time, you’ll receive that money back into your account with interest until you’ve received the full amount. 

    It’s important to remember that every bank has its own stipulations for these types of GICs. They all have different annual rates as well as different payout amounts and times. Generally, the process works as follows: You submit your application, transfer the funds to the account, apply for our study permit, and then open a Canadian bank account when you arrive.

    Final Thoughts

    When it comes to getting a GIC, there are so many options to choose from. Not only are there different types of GICs in Canada, but each financial institution offers different GICs with different GIC terms and rates. 

    When you’re deciding between GICs and other investments, it’s important to keep all of your options in mind. At the same time, the most common option is to use GICs as a way to diversify your portfolio. If you don’t want to lock in your savings, though, another option is a high-interest savings account. That said, you can always talk to a financial advisor to help you make the right investment decisions for you to meet your investment goals. They can even help with GIC investment strategies if you choose to invest in them. 

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