The Best GIC Rates in Canada for 2023

The stock market is no place to park your short-term savings. Whether you’re saving for a car purchase, house down payment, or to fund your retirement spending, if you need to access your money in 1-5 years, you’ll want to ensure your money is absolutely safe while earning the maximum risk-free rate of return. The way to do that is to purchase a Guaranteed Investment Certificate (GIC) — a type of investment that pays you a guaranteed interest rate.

It works like a savings account: you simply deposit the money into an account and get an annual interest rate. However, unlike a savings account, your investment is usually “locked in” for a set period of time (anywhere between 30 days to 5 years). Considered one of the safest investments you can make, GICs can be held in both non-registered and registered (ex. TFSA and RSP) accounts and the best GIC rates in Canada range from 2% to 3% and up, depending on the length of the term.

Best GIC Interest Rates in Canada – 5-Year Term

Our Pick of Top 3 Best GIC Rates for 2023

Oaken Financial

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Oaken Financial is a subsidiary of Home Bank and its products are available to all Canadians. It has consistently offered some of the highest GIC rates in Canada (registered and non-registered), ranging as high as 5.05%, as well as flexible terms of 30 days to 5 years. Clients need a minimum of $1,000 to invest. Each deposit is available through either Home Bank or Home Trust Company, both of which are separate members of CDIC.

People’s Trust

People’s Trust offers stellar rates on both registered and non-registered GICs. For non-registered accounts, clients can get GIC terms from 30 days to 5 years, with rates ranging from 3.40% to 5.00%. Registered GIC interest rates range from 4.50% to 5.00%.

People’s Trust has been in operation for over 30 years and is a CDIC-insured trust company with offices in Vancouver, Calgary, and Toronto. It’s an established institution that you can trust!

EQ Bank

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EQ Bank is brought to you by Equitable Bank, which has been around since 1970, and it’s one of our top choices for market-leading GIC rates in Canada. GIC terms are offered from 3 months to 10 years and currently range up to as high as 5.00%. EQ Bank has a minimum deposit of just $100. If you’re interested in getting an EQ Bank GIC, you must first open a Savings Plus Account, which has no everyday banking fees, unlimited Interac e-Transfers®, free day-to-day transactions, and a fabulous 2.50%* everyday interest rate. You really can’t go wrong with EQ Bank.

* Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

EQ Bank GICs: Rates are calculated on a per annum basis and are subject to change at any time.

Best 1-Year GIC Rates in Canada

This article focused on the best 5-year GIC rates in Canada, but we can also look at the best 1-year GIC rates in Canada to see how they compare. A one-year term is ideal for investors with truly short-term needs or for someone who’s setting up a GIC ladder.

1-year GIC rates are a great space to watch for promotions from banks and credit unions looking to capture your short-term business and turn you into a long-term client. Make sure you shop around!

Different Types of GICs

Registered GICs

If you purchase a GIC inside your RRSP, TFSA, or RESP, that’s considered to be a registered investment. Any interest earned on GICs inside these accounts will be tax-sheltered.

Non-registered GICs

GICs purchased outside of registered plans are considered to be non-registered investments and any interest earned is fully taxable at your highest marginal rate.

Non-redeemable GICs

Most GICs are what’s called “non-redeemable,” meaning your money is locked in for the duration of the term. You may have to prove financial hardship, and even then, you’ll face a steep penalty to break the contract early and get your money.

Redeemable GICs

You can purchase a redeemable GIC in 1-5-year terms, which will allow you to cash out prior to maturity under certain conditions. Interest rates on redeemable GICs will typically be lower than on non-redeemable GICs.

Cashable GICs

A Cashable GIC is a one-year investment that also gives you the flexibility to withdraw your money without penalty after a “closed” period of between 30 and 90 days. Again, the interest rates tend to be much lower than a non-redeemable GIC.

Fixed-Rate GICs

With most GICs, you’ll receive a fixed interest rate paid throughout the duration of the term (typically on an annual basis). With a fixed rate, you know in advance how much you’ll get back at the end of the term.

Variable Rate GICs

Some GICs pay a variable amount of interest depending on how well the stock market (or index) performs over the duration of the term. You may make more or less than with a fixed-rate GIC – the interest is variable.

Market-Linked GICs

A word about market-linked GICs – a product that’s being pushed more and more by Canada’s big banks. Market-linked GICs are hybrid products that aim to capitalize on the growth potential of the stock market without risking your original investment. The variable return is derived from the gains in equity markets over the term of the GIC – usually 3 or 5 years.

Like conventional GICs, market-linked GICs are guaranteed by the Canada Deposit Insurance Corporation to the maximum allowable limits and can be purchased in both registered and non-registered vehicles.

Interest income is paid on maturity. If the equity portion produces no return, you receive no interest at all. Pay particular attention to how the equity portion of the return is calculated.

The formulas used to determine your final investment return can be complicated, and the investment may be subject to a maximum return. For instance, if a market-linked GIC advertises a maximum 10% return over a 5-year term, this really means a maximum of just 2% per year (10%/5 years) – if the market performs well.

Know that if the market-linked index performs poorly, you may only receive your original principal back at the end of the term – but of course, inflation will have eroded the purchasing power of that money over five years.

GIC Investing Strategies

One of the most common and effective strategies for GIC investors is an approach called “GIC laddering.” Here’s how it works:

A GIC ladder means splitting your investment over a variety of terms. For instance, let’s say you have $50,000 and want to invest in GICs. You would put $10,000 into GIC terms of 1, 2, 3, 4 and 5 years to create what’s called a “rolling maturity cycle.”

So each year, you will have some money coming due that you will then re-invest in a new 5-year term GIC. Since the interest rate is higher for 5-year terms you will always be re-investing your maturing GICs at the highest rate.

This approach is a great hedge against rising or falling interest rates. If interest rates have gone down, only one-fifth of your money is immediately affected. If rates have risen, you have the opportunity to take advantage of those higher rates because you always have one GIC maturing each year. GIC laddering also gives investors some liquidity benefit since they will always have some money maturing each year.

Should You Get a GIC with a Bank or Credit Union?

Canada’s big banks aren’t known for paying out the highest interest rates on GICs or savings accounts. The best rates tend to be found at credit unions and online banks. An extra half of a percent per year could mean the difference between beating inflation or just treading water.

Banks are beholden to their shareholders and always look for ways to maximize profits. Credit Unions are cooperatives that are locally owned by their members. When a credit union maximizes shareholder return, its members tend to benefit through higher rates.

GIC FAQs

What is a GIC and Why Get One?

A GIC is one of the safest investments you can own. As the name indicates, your principal investment and interest rate are fully guaranteed. That makes GICs an ideal place to put savings that you can’t afford to lose and may need to access in the near future. GICs actually have a second layer of guarantees. Not only does the issuer guarantee your principal and interest, but your money is also protected (up to specified limits) by the Canada Deposit Corporation, or in some cases, by the issuing bank’s provincial treasury. In addition to providing safety and security, GICs come in a wide range of terms and maturity options. Need your money in three years? You can get a three-year GIC. The most common terms are 1-5 years. GICs are available in every account type, so you can stash some cash in a GIC within your RRSP, your TFSA, or outside of your registered accounts. While ideal for short-term savings, GICs can be used in more complicated investment strategies such as GIC laddering to generate retirement income.

How to Choose the Right GIC?

There’s a lot that goes into choosing the right investment. You’ll want to consider your time horizon, risk tolerance, and rate of return objectives before selecting a product.

GICs can play a crucial role in any investment plan, but they’re best suited for short, known time horizons and preservation of capital. The higher interest rate is a bonus, and since we’re living in such a low-interest rate environment, selecting a GIC with the highest interest rate can ensure your investment is keeping ahead of inflation.

The bottom line? Choose the right GIC by matching the term to your time horizon and then selecting from the best GIC interest rates.

What Are Market-Linked GICs?

A word about market-linked GICs – a product that’s being pushed more and more by Canada’s big banks. Market-linked GICs are hybrid products that aim to capitalize on the growth potential of the stock market without risking your original investment. The variable return is derived from the gains in equity markets over the term of the GIC – usually 3 or 5 years.

Like conventional GICs, market-linked GICs are guaranteed by the Canada Deposit Insurance Corporation to the maximum allowable limits and can be purchased in both registered and non-registered vehicles.

Interest income is paid on maturity. If the equity portion produces no return, you receive no interest at all. Pay particular attention to how the equity portion of the return is calculated.

The formulas used to determine your final investment return can be complicated, and the investment may be subject to a maximum return. For instance, if a market-linked GIC advertises a maximum 10% return over a 5-year term, this really means a maximum of just 2% per year (10%/5 years) – if the market performs well.

Know that if the market-linked index performs poorly, you may only receive your original principal back at the end of the term – but of course, inflation will have eroded the purchasing power of that money over five years.

How to Purchase GICs?

Most of the top GIC issuers publish their best GIC rates directly on their website for consumers to purchase. This is the fastest and easiest way to purchase a GIC. You don’t have to go into a branch, but of course, you can always meet with an in-branch advisor to buy a GIC. Alternatively, you can go through a deposit broker (like a mortgage broker) who will shop the market to find you the best rate.

How to Pick the GIC Right Term?

Generally speaking, the best GIC interest rates tend to be attached to five-year terms. But you can also choose terms of six months, 1 year, 2 years or up to 10 years. If you’ve decided to put a portion of your retirement savings into GICs, and retirement is five or more years away, then a five-year GIC term makes a lot of sense. When your GIC matures, you can roll it into another five-year term, or reassess your investment goals and go a different route. But you may not want to lock up your money for five years just to get a higher interest rate. Let’s say you have $50,000 saved for a down payment, but you’re not planning to buy a house for three years. In this case, a five-year term is too long to tie-up your money, so you’d select a three-year GIC. Sometimes your time horizon may be unclear, so you may want to choose a shorter term, such as 12 months, 18 months, or 3 years. In the meantime, you just want to ensure your money is safe while earning the highest risk-free return possible. In that case, a shorter term is best. Remember, once you lock-in your GIC investment it’s not possible to redeem your funds without penalty – so choose wisely. In some cases, you might be better off placing your money in one of the best high-interest savings accounts in Canada so your funds are accessible when you need them.

Final Thoughts

GICs can play an important role as a safe and secure investment for both your short-term needs and your retirement savings. Look for the highest GIC rates in Canada that pay interest above inflation, so your original investment is protected and maintains its purchasing power.

Then, match your investment time horizon with an appropriate term to ensure your money earns the maximum interest and is accessible when you need it. Remember, most GICs are non-redeemable, so if you’re unsure of your time horizon it’s best to choose a short-term or use a high-interest savings account.

Finally, shop around. There are great GIC interest rates available – not just at big banks but also at digital banks and credit unions.

Pondering what to do with your long-term savings? Learning how to invest in Canada is easy, especially thanks to the rise of robo advisors and online brokerages in Canada. Once you’re in the know, you’ll be a savvy investor in no time!

Rates are subject to change. Please see advertisers and/or partners for the most up-to-date information.