Guaranteed Investment Certificate

What is a GIC?

A Guaranteed Investment Certificate or GIC is a term deposit that offers a guaranteed rate of return over a fixed time period. GICs are most commonly issued by Canadian banks or Trust companies. In most circumstances they are insured by the Canada Deposit Insurance Corporation (CIDC). They are similar to the US Certificate of Deposit.

GICs with a term of less than 1 year are considered cash equivalents and are alternatives to Money Market Funds or High-Interest Savings Accounts. GICs with terms of 1-5 years are alternatives to conventional bonds.

Certificates of greater than 5 year term are offered by some insurance companies but are not CDIC-insured; these certificates are referred to as Guaranteed Investment Annuities (GIAs) and are considered insurance products. They are guaranteed by Assuris.

GICs are purchased for same-day settlement. Investors who sell stocks or bonds with "T+3" settlement should generally wait until the funds are in their account before purchasing GICs.

Getting the Best Rate

Many GIC issuers (such as your neighbourhood bank) may not give their best rate on first enquiry. Often they will first quote the official rate that they post in the branch and report to CANNEX and Fiscal Agents for publication in your local newspaper. If you have a good relationship with the institution, e.g., a bank account, RRSP, mortgage, credit cards, etc., and/or you want to purchase a relatively large GIC, at least $5,000 or $10,000, then you should be able to get a bonus rate of interest. Ask to speak with a bank officer, point out the length and value of your relationship and ask for a better rate.

Sometimes the discount brokerage divisions of the "Big-5" banks offer higher GIC rates than you can easily get at one of their retail banking branches. Print copies of their and/or their competitors' Discount Brokerage GIC Rates and ask the bank officer to match. Bank branches can't always do that but the more ammunition you have the better are your chances to get significant increases over their official rates.

Alternatively, look for Deposit Brokers who can offer you higher rates.

When you compare the best rate you can get from your own bank with the highest rate you can get from a competitor, it's useful to calculate the size of the difference in absolute dollars. For example a 0.25% higher interest rate on a $5,000 is only $12.50 per year. It may not be worth your time and effort to open an account and transfer money for such a small increase. On the other hand, 1% more on $10,000 is $100 a year.

Links - Rates

• Canadian GIC Rates - Annual
• Canadian GIC Rates - Semi-Annual
• Canadian GIC Rates - Quarterly
• Canadian GIC Rates - Monthly