When you are saving for your next big purchase or have extra money that you will not need right away, you could leave it sitting in your chequing account (or under your mattress). A better option may be to put that money to work in a High-Interest Savings Account (HISA) or a Guaranteed Investment Certificate (GIC). There is also a third option that sits somewhere between the two: a Notice Savings Account (NSA).
Assumes the rate is held to maturity. GICs over one year that pay at maturity compound annually; shorter terms use simple interest.
Assumes the rate is held to maturity. GICs over one year that pay at maturity compound annually; shorter terms use simple interest.
Guaranteed Investment Certificate
A Guaranteed Investment Certificate (GIC) is a way to earn interest on money that you agree to leave with a financial institution for a specified period of time. This period is called the GIC term and determines how long your money is invested until the GIC reaches maturity, meaning the end of its term. GICs are available for terms ranging from a few months to several years, with 1- to 5-year terms being widely available. Not every financial institution offers every term.
Most traditional GICs offer a fixed interest rate for the entire term, which means you know in advance how much interest you will earn. Some institutions also offer variable-rate GICs, where the interest rate can change over time, or market-linked GICs, where the return depends partly on the performance of an underlying market or index. Because these products work differently from traditional fixed-rate GICs, it is important to understand the specific product you are buying. AdvaEqs currently tracks fixed-rate GICs only.
The trade-off for the guaranteed return is usually reduced flexibility. With most non-redeemable GICs, you should assume the money will not be available until maturity, except in limited circumstances specified by the institution. Cashable or redeemable GICs allow earlier access under certain conditions, but they often offer lower interest rates than comparable non-redeemable GICs.
GIC rates are normally quoted as annual rates. Depending on the product, interest may be paid monthly, annually or at maturity. Some GICs compound the interest, while others pay it out, so it is important to check how interest is calculated and paid when comparing products.
High-Interest Savings Account
A High-Interest Savings Account (HISA) is exactly what it sounds like: a savings account that typically pays a higher interest rate than a regular savings account. One of its biggest advantages is flexibility. Unlike most GICs, a HISA does not require you to lock in your money for a specific period of time, and you can generally withdraw your funds when you need them, subject to the account's terms and conditions.
The main disadvantage is that the interest rate is usually variable. It can go up or down at any time, so the rate you receive today may not be the rate you receive several months from now. If the rate goes down, you will earn less interest on your savings. If it goes up, you will earn more. This makes your future interest income less predictable than with a fixed-rate GIC, where the rate is locked in for the entire term.
Depending on current market conditions, a GIC may offer a higher rate in exchange for committing your money for a fixed period, but that is not always the case.
HISA interest rates are normally quoted as annual rates. Interest is commonly calculated daily based on your account balance and paid into the account monthly, although the exact calculation and payment schedule varies by financial institution.
When comparing HISAs, look beyond the advertised interest rate. Check whether the rate is promotional or ongoing, as well as any account fees, minimum balance requirements, withdrawal limits or other conditions that could affect how useful the account is for you.
Notice Savings Account
A Notice Savings Account (NSA) is a type of savings account that requires you to give the financial institution advance notice before withdrawing your money. Depending on the product, the notice period might be 10 or 30 days, for example.
From a flexibility perspective, an NSA sits somewhere between a HISA and a non-redeemable GIC. You do not have to lock your money away for months or years, but you also cannot access it immediately. In return for giving advance notice, the institution may offer a higher interest rate than on a regular savings account. Like a HISA, the interest rate on an NSA is typically variable and may increase or decrease over time.
Like HISAs, Notice Savings Account rates are normally quoted as annual rates. Interest is commonly calculated daily and paid monthly, although the exact calculation and payment schedule depends on the product.
When comparing Notice Savings Accounts, also consider the notice period, whether the advertised rate is promotional or ongoing, and any account fees or balance requirements.
How to Choose Between a HISA, NSA and GIC
The right choice mostly depends on when you expect to need your money and how much flexibility you want.
If you are saving for a large purchase, such as a car or a house, and know that you will not need the money for a year or two, a GIC may be a good option because you can lock in a rate for that period.
If the money is part of your emergency fund or you may need it on short notice, a HISA is usually more suitable because your money remains readily accessible.
A Notice Savings Account can be useful when you do not need immediate access to your money but also do not want to commit it to a fixed GIC term.
The table below can help you make your decision:
If you... | Consider |
Need immediate access | HISA |
Can wait several days/weeks | NSA |
Know you will not need the money for a fixed period | GIC |
Want certainty about your return | Fixed-rate GIC |
Want flexibility and accept changing rates | HISA / NSA |
Deposit Protection
When you keep money in a HISA, Notice Savings Account or GIC, it is important to know whether your deposit is protected if the financial institution fails.
Many deposits held at Canadian banks and other member institutions are eligible for protection through the Canada Deposit Insurance Corporation (CDIC). Deposits held at many provincially regulated credit unions may instead be covered by a provincial deposit-insurance program. The amount of coverage and the rules depend on the institution, the type of deposit and, for credit unions, the province.
CDIC generally protects eligible deposits up to $100,000 per insured category, per member institution, including both the money you deposited and the interest you have earned. However, not every product offered by a CDIC member is automatically covered, so it is important to check the specific account or GIC before investing.
How to Use the AdvaEqs GIC Calculator
Use our AdvaEqs GIC Calculator to see how much you could earn. Enter the amount you want to invest, choose a term and select an institution or enter an interest rate. The calculator will show your estimated interest and maturity value. You can then view the best available rates or compare GICs across financial institutions.