GIC (Guaranteed Investment Certificate) is an investment plan introduced by the Canadian Government. It provides a guaranteed return on investment over a particular period of time. GICs provide a surety amongst the Canadian People to receive an amount with interest during the process.
The investment ranges from 1 year to 5 years. However, according to their needs, people can take out this amount after 30 days of investment. They can also keep this investment for up to 10 years.
The rate of GIC is dependent on the bank institutions in which you are investing your money and the period of investment. In times of inflation, where nothing is certain, guaranteed investments are something that is a relief as it provide stability of investment.
Best GIC rates in Canada
There are hundreds of GICs in the market but not all are created in the same way. To figure out the best GIC, there are two things to keep in mind to get the best advantage of these investment plans.
- High interest rates.
- Sustainable term length.
Mentioned below are a few of the best GIC rates in Canada as of August 2024:
- 5.10% – MCAN Wealth – 1 year
- 5.10% – MCAN Wealth – 2 years
- 4.75% – MCAN Wealth – 3 years
- 4.55% – MCAN Wealth, Saven Financial, 4.65% – ICICI Bank – 4 years
- 4.60%- ICICI Bank – 5 years
How do GICs work?
When you invest in a GIC, you grant your money to a financial institution for a specific period of time. The more you keep your money in a GIC, the more it generates interest. So, basically GICs work according to you,
if you want to take that money back after investing in a GIC, you can get your money back after 30 days. If you want to invest for a longer period, the maximum period of time is 10 years. However, the minimum amount of investment in a GIC is $500.
What are the types of GICs?
There are mainly 4 types of GICs, fixed-rate GIC, variable-rate GIC, Escalator GIC, and linked GIC.
Detailed information about all of them is mentioned below :
- Fixed-rate GIC: It provides a fixed interest rate and it doesn’t change throughout the period. The final amount is calculated after the maturity of the plan.
- Variable rate GIC: It is dependent on the annual percentage yield (APY), if the APY increases the interest will also increase, if it goes down so is the interest you earn. But, it provides a higher APY than the fixed rate GICs.
- Escalator GIC: It is also known as step-rate GICs, it gives a guarantee in increment of APY every year.
- Market-linked GICs: Here in these GICs, the interest rate is variable but still greater than the fixed GICs. Market-linked GICs are dependent on the stocks, that’s why, it only provides a limited amount of interest.
How are GICs calculated?
Higher rates of GICs are kept for a longer period of investment. GIC rates are stated by the financial institutions that provide GICs.
An individual can also calculate their return of investment using a GIC calculator and using the below information :
- Initial Deposit
- Interest Rate
- Term Length
- Compounding Interest
For example, if you’ve invested for a year in a GIC that has an earning APY of 2.50%, then you would earn $25 at the end of the maturity period. Similarly, if you’ve invested in a two-year plan with the same APY, then you would earn $50.62.
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Frequently asked questions about GICs
GIC (Guaranteed Investment Certificate) is an investment plan introduced by the Canadian Government. The GIC provides a guaranteed rate of return over a particular period of time.
While choosing a GIC, one should consider these factors- APY, compound schedule, minimum requirement of deposit, customer experience and feedback, and safety.
$500 is the minimum required amount to buy a GIC.
Currently, the minimum rate of GIC is 1.25% and the maximum is 4.90%.
Riya Claire is the Editor-in-Chief of the East Hampton Chamber Portal. She holds a degree in Mass Communication, an MBA in Finance, and a diploma in HR, making her a versatile professional for an online portal