Put $10,000 into a GIC at 4% for three years, compounding yearly, and it is worth $11,248.64 at maturity. That is $1,248.64 in interest. Simple interest on the same GIC would pay $1,200. Enter your own amount, rate and term above.
What a GIC is
A guaranteed investment certificate is a deposit paying a fixed rate for a set term, from 30 days to five years or more. In most cases the money stays locked in until maturity. The reward is a rate that usually beats a regular savings account.
Simple or compound interest
Some GICs pay simple interest at maturity, while others compound, so interest earns interest. On $10,000 at 4% over three years, yearly compounding gives $11,248.64, twice a year gives $11,261.62 and monthly gives $11,272.72. More frequent compounding pays a little more.
The effective yearly rate
This figure shows what you really earn in a year once compounding is counted. At 4% compounded monthly it is 4.07%. Use it to compare GICs that compound at different intervals. The higher effective rate wins, whatever the headline says.
The arithmetic is short. Divide 4% by 12 to get 0.3333% a month, raise one plus that to the power of 12, and subtract one. The result is 4.07%. Over three years, that same monthly rate gives the $11,272.72 shown above. A common mistake is comparing a simple rate with a compounded one.
Tax on GIC interest
Outside a registered account, GIC interest is taxable in the year it accrues, even when you are not paid until maturity. Inside a TFSA or an RRSP it is sheltered. Holding a multi-year GIC in a taxable account means planning for the tax every year.
Compare the total in dollars as well as the rate. A one year GIC at 4.5% pays $450 on $10,000, while a three year GIC at 4% compounding yearly pays $1,248.64, and a shorter term lets you reinvest sooner. The right choice depends on when you need the money. Match the maturity date to the date of the goal, such as a down payment, so no cash sits idle or gets locked away too long.
Choosing a term
Longer terms often pay more, but the money is tied up. If rates could rise, a shorter term or a ladder helps. A ladder splits your money across GICs maturing in different years, so each one that ends can be reinvested at the new rates.
Deposit insurance
GICs at banks that belong to the Canada Deposit Insurance Corporation are insured up to a set limit per category. Confirm the limits and terms with your institution before you invest. Do this especially for large amounts.
GIC or savings account
A high-interest savings account pays a variable rate and lets you withdraw at any time. A GIC locks in a rate for the term. If you expect rates to fall, a longer GIC can hold today’s higher rate. If you may need the cash, the savings account is safer.
Cashable and non-cashable
A cashable GIC can be redeemed early, usually at a lower rate. A non-cashable one keeps the money until maturity. Some banks allow early redemption in special cases, such as a death in the family. Read the terms before buying, and check what happens if you need cash.
Reading a rate sheet
Banks post GIC rates by term and by amount. Look at whether small and large deposits get the same rate, and whether the rate applies to a registered or a non-registered account. Compare the effective yearly rate across offers, since interest that compounds more often is worth slightly more.
Where to go next
The compound interest calculator models longer growth. Keep the GIC in a TFSA to avoid tax on the interest. Other interest questions are covered by the interest calculator.
Frequently asked questions
How is GIC interest calculated?
Either as simple interest at maturity, or compounded yearly, twice a year or monthly.
How much is $10,000 in a 4% GIC after three years?
$11,248.64 with yearly compounding.
What is the effective yearly rate?
The real yearly return once compounding is counted.
Is GIC interest taxable?
Yes, outside a TFSA or RRSP, in the year it accrues.
Can I take my money out early?
Usually not, unless the GIC is redeemable, which often pays a lower rate.
What is a GIC ladder?
GICs that mature in different years, so you can reinvest regularly.
Sources and updates
Last reviewed: . Full disclaimer. How we build calculators. Editorial policy.
Estimate only. This calculator gives general information for planning. It is not tax, legal or financial advice, and it is not affiliated with the City of Toronto, MPAC or the Canada Revenue Agency. Results depend on the numbers you enter and may differ from official amounts. Check official sources or a qualified professional before you decide.