What is a GIC in Canada? How fixed-term deposits work
A guaranteed investment certificate (GIC) is a deposit you leave with a bank or credit union for a fixed term, commonly 30 days to 5 years, in return for a guaranteed interest rate. Your principal is guaranteed. The GICs with the highest rates are usually non-redeemable, which means you cannot take the money out before the term ends. Eligible GICs at CDIC member institutions are insured up to $100,000 per insured category.
Main types of GIC
Non-redeemable (locked in): you cannot withdraw before the maturity date. These usually pay the highest rate for a given term.
Cashable or redeemable: you can take the money out early, sometimes only after a waiting period such as 30 or 90 days, in exchange for a lower rate.
Market-linked: the principal is guaranteed, but the return depends on how a stock market index performs and can be zero.
Registered: a GIC held inside a TFSA, RRSP, FHSA or RESP. The GIC works the same way; the account decides how the interest is taxed.
How interest and tax work
Interest may be paid at maturity, once a year or more often, and may be simple or compounded. When you compare rates, compare the same term and the same payment type.
Outside a registered account, GIC interest is taxed as regular income. For a GIC longer than one year, you report the interest earned each year, even if the bank pays it only at maturity.
Is my money protected?
The Canada Deposit Insurance Corporation (CDIC) covers eligible deposits, including GICs of any term and deposits in foreign currency, up to $100,000 per insured category at each member institution. The limit counts principal and interest together.
Credit unions are not CDIC members. Their deposits are covered by a provincial deposit insurer, and the limits differ by province. Check who the insurer is before you buy.
Is a GIC the same as a fixed deposit or time deposit?
In practice, yes. A GIC is what Canadian banks call a fixed-term deposit. Some banks also sell "term deposits", which work in a very similar way.
Can a newcomer or international student buy a GIC?
Yes. You need an account with the bank or credit union that sells it, not a Canadian credit history. A "student GIC" used as proof of funds for a study permit is a separate product with its own rules.
What happens when a GIC matures?
The bank pays out your principal and interest or renews the GIC, depending on the instructions you gave. Check the renewal rate first, because an automatic renewal is not always at the best rate available.
Official sources
- Financial Consumer Agency of Canada: deposit insurance
- CDIC: what's covered
- Canada Revenue Agency: line 12100, interest and other investment income
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