GICs are a good way to earn a guaranteed amount of interest. If you hold American dollars, you may want to consider investing in U.S.-dollar GICs.
Why invest in U.S.-dollar GICs?
You might want to hold U.S.-dollar investments because you expect the Canadian dollar to decline or you don’t want to convert your American dollars. Buying a U.S.-dollar GIC is best suited for someone who wants to make a U.S.-dollar investment that’s guaranteed.
The rates for U.S.-dollar GICs are much lower than Canadian-dollar GICs. For example, all the one-year U.S.-dollar GICs on Ratehub.ca pay less than 1% while many one-year Canadian-dollar GICs have rates of more than 1% (check out the best GIC rates).
As of Dec. 19, 2016, these are the best U.S.-dollar GIC rates in Canada (for GICs with a one-year term and a minimum $5,000 investment):
|Financial institution||Interest rate|
|State Bank of India||0.75%|
|ICICI Bank of Canada||0.65%|
|TD Canada Trust||0.5%|
|RBC Royal Bank||0.35%|
While U.S.-dollar GIC rates are low compared to Canadian-dollar GIC rates, they’re much higher than what you’d receive on a U.S.-dollar savings account. The rates being offered on U.S.-dollar savings accounts by the Big Five banks on a $5,000 deposit are as low as 0.025% and as high as 0.15%.
The bottom line
A U.S.-dollar GIC provides a better return than a U.S.-dollar savings account. However, the rates are much lower than their Canadian-dollar counterparts. Also, you could lose money in a U.S.-dollar GIC should the Canadian dollar soar.