While the returns are guaranteed, if inflation occurs in the economy, the returns may not keep pace with inflation and the value of the GIC may be reduced.
Interest rates can vary by financial institution. Even small differences in interest rates can make a big difference in how much you earn on your investment.
GICs provide a guaranteed rate of return for a set term. The end of that term is your maturity date. That’s when your initial investment will be returned to you. While some GICs pay interest monthly, every three months, every six months, or once a year, others only pay interest on the maturity date. Depending on the type of GIC you choose, withdrawals from your GIC before your maturity date may be subject to penalties.
The Canada Deposit Insurance Corporation (CDIC) insures GICs offered by CDIC members. However, GICs provided by provincial credit unions and insurance providers are not insured by the CDIC.
GICs with longer terms tend to offer higher interest rates. If you don’t need the money you’re investing back quickly, consider investing in a GIC with a longer term to benefit from higher rates.
Learn more about GIC rates and GIC laddering strategies in this article.
