Compare GIC Rates
Did you know the best GIC rates might not be found at the big banks? Use our tool to find the best GIC rates from all the providers across Canada.
Long-term guaranteed investment certificates (GICs) are simply GICs with terms that are one year or longer – typically 1, 2, 3, 4, 5, and sometimes 7 and 10 years. Financial institutions guarantee the principal (the original investment) plus an advertised rate of interest, and usually the longer the term, the higher the interest rate.
Did you know the best GIC rates might not be found at the big banks? Use our tool to find the best GIC rates from all the providers across Canada.
Long-term GICs are appropriate if you want to invest your money for an extended period of time and you don’t want to run the risk of losing your original investment. Compared to short-term GICs, long-term GICs tend to offer higher interest rates. And if you consider yourself a conservative investor, long-term GICs can be part of the fixed income component of your portfolio; they don’t offer high returns, but they are a safe investment, because the principal is guaranteed.
Rebecca is looking to put $10,000 in a GIC for about 5 years, and is considering buying either five consecutive 1-year GICs @ 1.30% or one 5-year GIC @ 1.90% compounded annually. She chooses the 5-year GIC option, because she assumes the 1-year GIC rate will stay at 1.30% for the entire 5 years – and she’s right. (This is a hypothetical situation, as no one can predict what will happen in the future.)
Rebecca passed up the idea of buying five consecutive 1-year GICs at 1.30% and, instead, bought one 5-year GIC at 1.90% that compounds annually. Assuming the 1-year GIC rate stays at 1.30% for 5 years, Rebecca would obviously earn more interest with her one long-term GIC, but let’s see exactly how much.
Year | Principal (end of year) |
Interest |
---|---|---|
1 | $10,130.00 | $130.00 |
2 | $10,261.69 | $131.69 |
3 | $10,395.10 | $133.41 |
4 | $10,530.24 | $135.14 |
5 | $10,667.13 | $136.89 |
Total | $667.13 |
Year | Principal (end of year) |
Interest |
---|---|---|
1 | $10,190.00 | $190.00 |
2 | $10,383.61 | $193.61 |
3 | $10,580.90 | $197.29 |
4 | $10,781.94 | $201.04 |
5 | $10,986.80 | $204.86 |
Total | $986.80 |
As you can see, Rebecca’s decision to choose a 5-year GIC at a higher rate, over five 1-year GICs at a lower rate, helped her earn an additional $319.67 in interest over the life of her investment.
Unlike short-term GICs which mature very quickly, long-term GICs mean parting with your money for an extended period of time; this brings with it a few potential risks to consider before investing: