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How do GICs work?

GIC basics Add to ...

A quick look at how GICs work​.

A guaranteed investment certificate (GIC) is an investment that works like a special kind of deposit. When you buy a GIC, you are agreeing to lend the bank or financial institution your money for a set number of months or years (the term). You are guaranteed to get the amount you deposited back at the end of the term. For this reason, GICs are one of the safest ways to invest.

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9 things to know about GICs 

  1. The minimum amount you can invest is typically $500.
  2. You don't pay any fees when you buy a GIC.
  3. Most GICs pay a fixed rate of interest for a set term, such as 6 months, 1 year, 2 years or up to 10 years. The term ends on the maturity date.
  4. Some GICs offer variable interest rates, based on the performance of a benchmark such as a stock exchange index.
  5. In general, the longer the term, the higher the interest rate you will earn.
  6. You may get paid interest on your GIC monthly, every 3 months, every 6 months, once a year or only on the maturity date.
  7. With some GICs, if you need to get your money back sooner, you will have to pay a penalty. Other GICs — called cashable or redeemable GICs — allow you to get your money back at any time with no penalty.
  8. Your money is protected, up to set limits, through the Canada Deposit Insurance Corporation (CDIC). This doesn't apply to US dollar GICs or GICs with terms over 5 years. 
  9. You can hold GICs in registered investment accounts like RRSPsRRIFs and TFSAs.


If you think you may need your money before the end of the term, buy a GIC that allows you to cash it in early without any penalty.


Make saving automatic

You can arrange for a set amount to be taken each month, from your bank account or from your pay, to put toward buying GICs. This is often called a pre-authorized debit (PAD), pre-authorized contribution (PAC) or pre-authorized purchase (PAP).

Other options for short-term savings: GICs are just one of the ways you can save for the short term. Here are some other options to consider.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

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