There are two main kinds of Guaranteed Investment Certificates (GICs):
- GICs that pay you a set interest rate for using your money for a certain amount of time.
- GICs that pay varying amounts of interest, based on how well the stock market (or a related index) is doing. These GICs are called index-linked or market-linked GICs. Although you can't be sure how much you will earn with this type of GIC, it gives you a chance to earn more if the stock market does well.
Different financial institutions offer different options, which may affect where you decide to buy your GIC. Before you buy, make sure you know the answers to these three key questions:
1. How long will I invest my money in this GIC?
- You select the time period for your GIC when you buy it. The end of the time period is called the maturity date.
- You can buy GICs that mature in as little as 30 days, or as long as 10 years. Usually the longer the term you choose, the higher the rate of interest you will get.
- Most people buy them for one, three, or five years unless interest rates are very high.
2. How much interest will I receive? How often?
- You may get paid interest on your GIC monthly, every three months, or once or twice a year.
- Quite often, you will earn less for a GIC that pays interest monthly. That's because it costs more to keep track of the interest and pay you each month.
3. Can I get my money back early without a penalty?
- With regular GICs, you will likely have to pay a charge or penalty. Even if you only need some of your money, you might have to take it all out. That?s how most GICs are set up. Also, you may not earn any interest on your money.
- You can buy a redeemable (cashable) GIC. This means you can get your money back early, without paying a penalty. The downside is that a redeemable GIC will pay less interest.
Tip: If you know you are going to need some money from your GIC each year, you can buy a five-year GIC that will pay back one-fifth of the money you invested each year, plus interest.
Remember: Watch interest rates if you're buying GICs
The interest rates offered for GICs can change often. They can also vary depending on where you buy and the options that you choose. Always ask if you can get a better rate, especially if you are a long-term client.
offers a survey of interest rates for GICs from banks and other companies across Canada.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.