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5 Tips for Buying GICs with the Best Rates


Whether you are saving for retirement, a child’s university tuition or a trip to Venice, a Guaranteed Investment Certificate (GIC) is one of the best pecuniary instruments to take advantage of to meet your life goals.

Although the Bank of Canada (BOC) is gradually raising interest rates, they haven’t been fully normalized yet, which means the rate of return will continue to be disappointing with each passing month. This is partly why some investors avoid parking their money in GICs, and will opt for riskier options, like stocks, mutual funds or even ETFs.

It is always a good thing to have a diversified portfolio, but it is still important to delve into safe investment options, including a GIC. And, you can still receive modest interest rates if you do your due diligence, shop around like a consumer and perform plenty of research.

You may think it’s impossible to get respectable rates, but it isn’t as impossible as you’d believe.

Here are five tips for buying GICs with the best rates:

1. Use Online Banks for GICs

The future of banking is online.

As you have likely witnessed, the marketplace has produced a number of online financial institutions that offer higher interest rates than your typical brick-and-mortar bank. It is true that older consumers are apprehensive about choosing online banks, but younger consumers are getting on board – when was the last time you physically walked into a branch?

When you’re searching for GICs with better returns, your best option is an online bank. Whether you’re picking a 90-day GIC or a three-year GIC, you will receive anywhere from a few basis points or a few percentage points higher.

And that’s better than nothing.

2. Park Your Money Longer

The shorter your GIC is the lower your rate of return will be. On the other hand, the longer your GIC is the higher your rate will be. Think about it.

Let’s be honest: for the average person, you need every penny available, which could make it harder to purchase a five-year GIC. But if the rate is what’s important to you, and you could spare $1,000 or $3,000 for a couple of years, then you should definitely use long-term GICs.

3. Lock in Your Investment

Some financial institutions allow you buy GICs that are not locked in. Unfortunately, if you decide to pick this investment vehicle, you must be ready for a lower rate of return.

Of course, if you want the best rate possible, then the logical choice would be to lock in your GIC, something that you can’t touch for six months or 18 months.

It should be noted that even if you buy a locked-in GIC, you still have the option of selling it, but you will be slapped with a penalty – the percentage depends on what bank you’re using.

4. Be Smart: Shop Around

This may be common sense, but when it comes to our money and banks, we refrain from shopping around the best rates, whether it’s for a mortgage or a line of credit. Ditto for GICs.

Yes, it is convenient to your bank for a GIC, but if a high interest is what’s really important to you, then it is essential to peruse the marketplace and determine which bank, physical or digital, is offering clients high-rate GICs.

5. Choose a Tax-Free GIC

Here is a simple way to maximize your best GIC rates and investment: place it inside of a Tax-Free Savings Account (TFSA). Even if your GIC offers just 1.5 percent over two years, the consolation is that you don’t have to pay tax on that.

As long as you’re within your contribution room, you can take full advantage of the TFSA benefits.

Let’s face it: Guaranteed Investment Certificates are not sexy like shares in Suncor Energy, Amazon or Canadian Tire would be. Since not everyone is Warren Buffet or Donald Trump, a GIC is a great complement to your portfolio. Moreover, when you want to sock money away for a particular financial objective, a GIC is a sublime pecuniary tool to have in your arsenal, especially since you won’t touch it out of fears for penalties.

Have a GIC in mind? Let’s start investing! What is more exhilarating than having your money work for you?