3.2.2 Term deposits and guaranteed investment certificates
- Term deposits and guaranteed investment certificates (GICs) are different names for similar products. Both are a type of deposit that you make with a financial institution, usually for a fixed period of time. If you need to withdraw the money before the end of the fixed term, the institution may refuse or may charge a penalty.
- Most pay a fixed rate of interest. For example, you deposit $1,000 for a one-year term at 3.5 percent interest. At the end of one year, you can withdraw the amount plus $35 interest.
- Term deposits and GICs usually pay higher interest than savings accounts when you leave the money for the entire fixed term.
- Often there is a minimum amount you have to deposit, although for some term deposits the minimum may be just a few hundred dollars.
- Term deposits and GICs have a variety of terms and interest rates. Ask questions to make sure you understand what the limits are before you put money into one.
- You can deposit money in a term deposit or GIC at most financial institutions. Some other institutions, such as investment dealers and life insurance companies, may also accept term deposits.
- Some term deposits and GICs offer special features, such as rates that rise over time or that change with stock market values. Be sure you understand what you will receive on your deposit and any limits on the deposit. Shop around to find the best interest rate for the length and type of term you want.
- For more information on choosing investments, see the Investing module.
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