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How does a Guaranteed Investment Certificate (GIC) work in Canada?

Written by Amine

A Guaranteed Investment Certificate or GIC is a type of Canadian investment that guarantees a rate of return for a fixed period of time. This particular type of financial product is a relatively low-risk investment and therefore offers lower returns than stocks, bonds, and mutual funds. GICs are usually provided by banks or trust companies. These safe and secure Canadian investment vehicles earn interest at a fixed rate, variable rate or market-based index. Many Canadians consider GICs to be an excellent option for investment portfolios that require some measure of security.

How does a Guaranteed Investment Certificate work?

With these products, you will invest a certain amount of money (up to you) over a period of time, depending on the particular GIC type you choose. Typically, these time periods vary widely, ranging from 1 day to 10 years. Long-term investments will earn more interest than short-term investments. When your Guaranteed Investment Certificate expires (also called “expiration”), you not only get the initial cash, but you also earn interest.

Some Canadian Guaranteed Investment Certificates require that the amount you initially invest remain “locked in” for a minimum period of time (eg 30 days). Other GICs allow you to withdraw money before the maturity date. There are even Guaranteed Investment Certificates that allow you to grow your initial cash amount by making weekly, fortnightly or monthly contributions.

Callable and non-callable

Guaranteed investment certificates can be callable or non-callable. As mentioned earlier, there are some GICs that allow you to use your cash within the term. This is called “callable”. With callable assets, you will be able to withdraw cash before maturity. Some callable GICs designate that you will earn less interest if you cash out before maturity. Non-callable counterparts do not allow withdrawals prior to the maturity date. Non-callable GICs may have higher interest rates than callable GICs.


This particular type of Canadian property can be offered at a fixed or variable rate.

Fixed rate GIC

With a fixed rate GIC, your money will earn interest at a fixed rate. That is, the interest earned will remain the same throughout the life of the investment. The benefit of a fixed rate GIC is that you can accurately predict what your total assets will be worth at maturity.

Variable Rate GIC

Variable rate guaranteed investment certificates are either tied to the Canadian Prime Rate or to stock market performance. With an interest rate-linked GIC, you are guaranteed that your money will grow, but you don’t know how much until maturity. With a market-linked GIC, you can earn more interest if the stock market does well, but your initial investment is protected either way.

Benefits of GICs

The most important benefit that this type of investment offers is safety and security. Your initial cash amount will be protected. With a fixed-rate GIC, you also enjoy guaranteed growth and an easy way to project value at maturity. GIC is also known for offering excellent interest rates. Finally, GICs are generally very flexible investments. You enjoy flexibility in terms of length of term and frequency of payment.

If you live in Canada and are interested in investing your money in a safe vehicle, a Guaranteed Investment Certificate may be right for you. To find out more about what’s available in your area, visit your local bank.

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