What is a GIC and how does it work? A GIC (guaranteed investment certificate) is the simplest deal in Canadian finance: you lend a bank or credit union a lump sum for a fixed term, they pay you a fixed rate, and at maturity you get your principal back plus the interest, guaranteed. No market risk, no fees to hold it, no surprises, provided you can leave the money alone until the term ends.
That’s the version every bank website explains cheerfully. The part they explain less cheerfully: the rate on the exact same one-year deposit ranges from under 3% to 4.00% depending on where you buy it, and the low end of that range is where the big banks live. The brochures skip that part, so we won’t.
How a GIC works, in sixty seconds
Four moving parts: a deposit, a term, a rate, and a maturity date.
You deposit a lump sum, say $10,000. You pick a term, commonly anywhere from 90 days to five years. The institution locks in a rate for that whole term. At maturity you receive your principal plus interest.
At the best 1-year rate on our boards (4.00%, from Brunswick Credit Union, as of our August 26 data) that $10,000 becomes $10,400. The 4.00% was fixed on day one; nothing that happened to markets in between changed it.
Your principal is protected twice over: first by the institution’s obligation to repay it, and second by deposit insurance. That means CDIC coverage at banks and provincial coverage at credit unions. The details are worth five minutes; our deposit insurance guide walks through them. If you want the shortest possible primer on the product itself, that’s what is a GIC, or GetSmarterAboutMoney’s independent explainer of how GICs work if you’d rather hear it from an investor-education site.
One more mechanic worth knowing before you shop: the rate curve. You’d expect longer terms to pay more, in a tidy ascending line. The market disagrees. The best non-registered rates on our boards by term: 4.00% for 1 year, 4.25% for 2 years, 4.05% for 3 years, 4.10% for 4 years, and 4.30% for 5 years. Notice the hump in the middle: the 2-year currently out-pays both the 3-year and the 4-year. Institutions price terms based on what funding they want on their books, not on a textbook curve, so never assume longer means higher. Read the curve for the week you’re actually buying.
The types of GICs, decoded
Bank product pages sort GICs into families with proprietary names. Underneath the branding there are really four types of GICs.
Fixed-rate, non-redeemable: the default, and what this guide mostly describes. Locked to maturity, pays the highest rate. Every figure above is this type.
Cashable (or redeemable): you can exit early, usually after a short initial waiting period, sometimes at a reduced rate. The cost of that exit door is a visibly lower rate than the same institution’s non-redeemable offer; we price the cashable vs non-redeemable trade in its own guide. If you genuinely might need the money on no notice, compare the cashable rate against a high-interest savings account before accepting the discount; sometimes the savings account does the same job with no lock at all.
Market-linked (or equity-linked): your principal is guaranteed, but the return is tied to a stock index, almost always with a cap on the upside and a real possibility of zero interest if the index disappoints. The complexity in these products mostly works for the issuer. We compare rates; a product with no stated rate is hard to put on a board, which tells you something.
Foreign-currency: usually USD term deposits. Same mechanics, different currency, plus exchange-rate risk on the way in and out.
Big bank GIC rates vs the market
Search for RBC GIC rates or TD GIC rates and you’ll get one institution’s posted sheet, with no way to tell whether it’s competitive. That’s the gap our boards exist to close: they line up the banks, credit unions and insurers that actually compete for deposits, so the posted sheet has context (how we build the boards).
The table sets the big-bank posted average (the mean of big-bank posted non-registered, non-redeemable rates per term, from the same boards) against the best rate we observe:
| Term | Big-bank posted average | Best on our boards | Gap | Extra interest per year on $10,000 |
|---|---|---|---|---|
| 1 year | 2.93% | 4.00% (Brunswick Credit Union) | 1.07 pts | $107 |
| 2 years | 3.06% | 4.25% (Brunswick Credit Union) | 1.19 pts | $119 |
| 3 years | 3.12% | 4.05% (Wealth One Bank of Canada) | 0.93 pts | $93 |
| 4 years | 3.23% | 4.10% (Wealth One Bank of Canada) | 0.87 pts | $87 |
| 5 years | 3.35% | 4.30% (Wealth One Bank of Canada) | 0.95 pts | $95 |
Compounded over a full 5-year term, the last row is about $550 more interest on $10,000. On $50,000 in a 1-year, the gap is $535 a year.
Two things about the word “posted.” First, it’s an opening position: big banks run limited-time specials, and branches have discretion for larger deposits, so the posted sheet is the rate for people who don’t ask. Second, the competitive market doesn’t play that game. Challenger banks and credit unions print their real number and change it often: in the two days ending August 26 alone, Wealth One moved eight rates up by as much as 0.15 points while Equitable Bank trimmed twenty by up to 0.16. Rates are a live market — even when the poster in the branch window isn’t.
Tax lanes, fine print, and when the big bank still wins
Where you hold a GIC changes what you keep. Same product, four outcomes:
| Tax lane | How the interest is treated | Best 1-year on our boards | Best 5-year on our boards |
|---|---|---|---|
| Non-registered | Taxed as ordinary income at your marginal rate | 4.00% | 4.30% |
| TFSA | Tax-free | 4.00% | 4.25% |
| RRSP | Tax-deferred until withdrawal | 4.00% | 4.25% |
| FHSA | Contributions deductible; withdrawals tax-free toward a first home | 3.45% | 4.00% |
The FHSA lane runs lower because fewer institutions offer FHSA GICs, so the competition is thinner. The tax treatment can still make it the better lane for first-home money; the FHSA boards show who’s actually competing there. Interest is the least tax-efficient income you can earn in a non-registered account, which is why sheltering a GIC matters more than sheltering most things.
Then there’s the fine print, which is where the product gets more expensive. Auto-renewal is the big one: at maturity, many institutions roll you into a new GIC of the same term at their posted rate unless you act within a grace window. The renewal letter is the quietest expensive document in Canadian banking — doing nothing can turn a shopped 4.00% into a posted sub-3% for another full year. Transfer-out fees work on registered money instead: moving a TFSA, RRSP or FHSA GIC to another institution usually triggers a fee that can eat a meaningful slice of a year’s rate advantage, so price the fee into any move, or buy in the right place the first time.
Early redemption, on a non-redeemable GIC, is generally not possible, and where an institution allows it at all, expect forfeited interest; treat “non-redeemable” as literal. Watch the payment frequency too, since a GIC that pays interest out monthly or annually, rather than compounding it, often carries a slightly lower effective rate; check which number the ad is quoting. And minimums vary widely by institution: some let you start small, some want four figures. The GIC glossary defines the rest of the fine-print vocabulary.
And sometimes the big bank still wins. If your registered accounts already live there, transfer fees can wipe out a year of rate advantage on a small balance. If you’re negotiating on a large deposit, the posted sheet isn’t the final word. And some people will pay $107 a year on $10,000 for the convenience of one login. That’s a real trade; it should just be a priced one, not an accidental one.
What to do with this
Pick your term and your tax lane, then check what the market actually pays on the live GIC boards, the same data every number in this guide came from. If your money isn’t ready to move yet, set a rate alert and let the market come to you. What you do once you’ve seen the gap is your call.
Frequently asked questions
What is a GIC and how does it work?
A GIC is a deposit you lock in with a bank or credit union for a fixed term at a fixed rate. At maturity you get your principal back plus the promised interest, guaranteed. At 4.00%, the best 1-year rate on our boards, $10,000 returns $400 in interest.
What’s the difference between cashable and non-redeemable GICs?
A cashable GIC lets you withdraw early, usually after a short waiting period, in exchange for a lower rate. A non-redeemable GIC locks your money until maturity and pays more. The rate difference between the two is the price of the exit door.
Are GICs safe?
Your principal and rate are contractually guaranteed by the issuer, and deposit insurance backs the deposit: CDIC at banks up to $100,000 per insured category, provincial plans at credit unions. The realistic risks are liquidity (your money is locked) and inflation outpacing your rate; losing the principal isn’t one of them.
What types of GICs are there in Canada?
Four, once you strip the branding: fixed-rate non-redeemable (the default), cashable or redeemable, market-linked (principal guaranteed, return tied to an index and usually capped), and foreign-currency. Fixed-rate non-redeemable pays the most and is what rate comparisons quote.
What happens when my GIC matures?
The institution pays out your principal and interest, or, if you do nothing, many will auto-renew you into a new term at their posted rate. Diarize the maturity date and re-shop the market during the grace window rather than accepting the roll-over by default.
Rates referenced in this article were checked against Ratehunter's data on the publication date shown above and may have changed since — the rate boards always carry the current numbers. See our editorial standards andadvertiser disclosure.