The Best Short Term GIC Rates in Canada in December 2024

Guaranteed Investment Certificates (GICs) have long been a staple in the Canadian investment landscape, offering a secure option for those seeking to preserve capital while earning a fixed rate of return. 

Short-term GICs, in particular, provide a financial instrument for investors with a shorter time horizon regarding their investments. These instruments generally have terms ranging from 30 to 364 days, allowing investors to benefit from the guaranteed principal and a predetermined interest rate. 

In this article, we’ll go over some of the best GIC rates available to investors today for short-term options and explain the intricacies of short-term GICs themselves so that you can see if they’re worth it or not for you.

What are the best short-term GIC rates right now?

**Rates can be per annum or per term. Check with the provider to see. The highest rate of the date range is displayed. Rates are updated as of January 3rd, 2024, and can change at any time. Use this table only as a starting reference.

** If you’re on mobile, click the “+” sign beside the banks name to see more rates.

VersaBank 30-60 Day GIC

4.3%

• Minimum $5000 invested
• GICs are non-redeemable
• Eligible for CDIC protection
• *Rate is per annum

Tangerine 270 Day GIC

5.20%

• No listed minimums
• GICs are non-redeemable
• Eligible for CDIC protection
• *Rate is per annum

Peoples Bank 270 Day GIC

5.25%

• No listed minimum
• GICs are non-redeemable
• Eligible for CDIC protection
• *Rate is per annum

What is a short-term GIC?

Short-term Guaranteed Investment Certificates (GICs) offer investors the security of preserving their principal with a guaranteed rate of return over a shorter period. Often, you can get 30-day to 1-year terms with short-term GICs.

This investment type appeals to those in need of liquidity and those looking to take a conservative approach to bridge gaps between long-term investment strategies.

Why do short-term GIC rates vary drastically?

In the realm of short-term GICs, financial institutions across Canada offer various options to suit different financial goals. I find Bank of Montreal to be the most diverse. In some institutions, like CIBC for example, they may not offer a particular short-term GIC maturity.

For example, investors seeking the highest short-term GIC rates available in Canada may find certain banks, typically online banks, providing more competitive options than others. This is due to their lower overhead nature, allowing them to operate at tighter “spreads.”

In addition, the general rule of thumb is that longer terms within the short-term spectrum may command higher rates. For example, you’ll typically get a higher interest rate on a 180-day GIC than a 30-day GIC.

Finally, some institution’s posted rate will be their annual interest rate on a short-term GIC, making it seem like the yield is higher than it is. For example, on a 90-day GIC, a bank may list 4%. You will not earn 4% in 90 days; this is the rate per annum. You’ll earn 25% of this.

You’ll notice that not all institutions on the list above even offer some of the shortest-term GICs available. It is entirely up to the bank as to what sort of terms they’d like to offer.

Why would you ever buy a short-term GIC?

Choosing to invest in a short-term GIC can be driven by multiple reasons. The primary benefit of a short-term GIC is a combination of low risks, guaranteed returns, and a shorter-term length.

If you’re looking to buy a car in six months, buying a long-term GIC doesn’t make much sense, does it? However, with a 60-day GIC, you can earn some small interest on the capital and buy the car when it matures.

Since the original investment amount is guaranteed, short-term GICs are considered one of the safest investment options. This makes them ideal for investors with low-risk tolerance. 

Investors may also use short-term GICs as part of a laddering strategy, where they invest in a series of GICs with staggering maturity dates to take advantage of varying interest rates and ensure regular liquidity. I go over GIC laddering in-depth in this article.

On top of this, if you must have liquidity over the short term, the interest rates, while lower than those offered on longer-term GICs, are often more attractive than regular savings accounts and even high-interest savings accounts.

Types of short-term GICs available

Cashable GICs

Cashable Guaranteed Investment Certificates (GICs) are a type of GIC that allows investors to access their funds before the maturity date without facing any penalties. Typically, these short-term GICs have a set period, often 30 to 90 days, during which the money must remain invested before early redemption.

This flexibility comes with an often slightly lower interest rate than non-redeemable options.

I’m not a massive fan of these products, as I believe the bank ultimately benefits the most from giving you the flexibility to cash them. Investors should buy non-redeemable GICs that fit into their investment strategy instead of capital they are sure they won’t need.

Non-redeemable GICs

With non-redeemable GICs, investors are committed to the GIC’s term, ranging from as little as 30 days to several years. 

The main advantage is a typically higher interest rate than cashable GICs due to the lack of early withdrawal options.

You’ll need to prove significant financial hardship to get money out of these GICs before they mature.

Variable rate GICs

Variable rate GICs offer interest rates that can change based on the market or an index. This is the opposite of fixed-rate GICs, which guarantee you a set rate of return. They provide the potential for higher returns if interest rates rise but also come with the risk that returns could diminish if rates fall.

These products are very similar to variable rate mortgages in adjusting the interest rate paid (in the case of a mortgage owed) whenever the Bank of Canada changes rates.

Some additional notes about short-term GIC types

One type you may not have noticed on this list is market-linked GICs. That is because you often have to have a mid to long-term maturity with these products. It is rare to find a short-term market-linked GIC, as asset prices can be exceptionally volatile over that period, so banks typically force longer terms to smooth out volatility.

In addition to this, you can buy registered and non-registered GICs that are short-term in nature. The only difference is that a registered GIC is held inside of an account like a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), Registered Education Savings Plan (RESP), or any other type of tax-sheltered account.

A non-registered GIC, on the other hand, is held in non-registered accounts like a cash account or margin account.

How to purchase a short-term GIC

Choose the right institution

Many Canadian financial institutions offer short-term GICs, but it is crucial to compare rates and terms before committing and make sure the institution is a member of the Canada Deposit Insurance Corporation (CDIC). CDIC deposit insurance is, in my opinion, an absolute must.

Many banks offer various rates, as you can probably tell by the table at the top of this article. However, One trick many investors don’t know about is that you can negotiate your rate with banks. Some may not budge, but you’ll likely find some flexibility in some institutions, which could have you locking in a higher rate of return. It never hurts to ask.

Know the minimums and maximums

Each bank sets its minimum and maximum investment limits for short-term GICs. For instance, financial institutions may require a minimum investment ranging from a few hundred dollars to several thousand. 

Often, you can lock in a higher interest rate if you provide more capital to the bank, and their advertised rates often depend on a minimum deposit. Make sure a bank isn’t coaxing you into thinking you’re getting a much higher rate than you are because of a high minimum investment.

Know the terms of the GIC

Short-term GICs typically have maturity dates less than one year from the date of purchase. While longer-term GICs can get paid semi-annually or annually or even let you earn compound interest by reinvesting the payments, you typically just get paid at maturity with a short-term option.

One element investors should know before the maturity date is how the funds will be handled once the GIC matures. I had a frustrating experience with a bank that kept reinvesting the funds into new GICs. I’d forget they mature; they’d pass the reinvestment window and be reinvested to the point where I couldn’t touch the money.

All in all, just know the terms of your GIC before buying.

Considerations before buying a short-term GIC

Make sure they align with your goals

Investors should contemplate their objectives about liquidity and returns. Short-term GICs often become due within one year, offering less yield than longer-term GICs but providing quicker access to capital. 

This can be especially favourable for investors anticipating a potential rise in interest rates, allowing them to reinvest at higher rates in the near future.

Understand the terms of your GIC

Investors must understand that these products often come with restrictions that discourage early withdrawal, which might negate the flexibility one seeks in short-term instruments.

If you buy a non-redeemable short-term GIC and have to pull the money out, you’ll have to prove financial hardship to the institution. If you manage to do this, you’ll likely get paid a lower rate of interest or possibly even no interest.

Comparing with other investment options

When evaluating short-term GICs, investors should consider other options such as savings accounts, mutual funds, stocks, bonds, and ETFs, particularly the very popular HISA (High-Interest Savings Accounts) ETFs that are out now. 

While the security and guaranteed returns of GICs are appealing, these other options may offer higher liquidity or potential for growth, though accompanied by greater risk.

Remember, if you have a very short time horizon, none of these options outside of HISA ETFs would likely be feasible. 

These alternatives are more so for those considering buying short-term GICs with capital they do not need access to for the long term.

• HISA ETFs: Newer products that provide high rates of interest that trade much like a stock. During peak interest rates, at some points, they were offering even 5.5%.
• Money Market Funds: These ETFs carry fixed-income investments like government bonds, GICs, and other fixed-income investments. The fund then charges you a management fee and pays you out a yield.
• Mutual funds/ETFs: Allow diversification and can potentially offer higher returns but with greater risk and fees.
• Stocks: Have potential for high returns but are volatile and may not be suitable for short-term investing.
• Bonds: Provide fixed income but might require a longer commitment to deliver appreciable returns.

Short-term GICs suit investors with a precise timeline and require guaranteed capital preservation for their near-term funds. 

These instruments serve as a conservative component within a diversified portfolio, balancing out the unpredictability of other investments.