Guaranteed Investment Certificate
In Canadian deposit terminology, the term Guaranteed Investment Certificate or GIC refers to a fixed income investment vehicle commonly issued by Canadian banks and trust companies. Guaranteed Investment Certificates have a guaranteed rate of return or interest rate, and they also return the original principal amount invested.
For example, a Canadian Guaranteed Investment Certificate generally has a maturity of from one to ten years and has a lower rate of return than other types of investments such as mutual funds, stocks or bonds. Typically a minimum deposit of $500 is required for a Guaranteed Investment Certificate in Canada, and interest is generally paid either monthly, quarterly or annually, with some Guaranteed Investment Certificates paying compounded interest at maturity. Many Guaranteed Investment Certificates will not pay interest in the case of early withdrawal and some of them even charge a fee for early withdrawals. Guaranteed Investment Certificates usually offer lower returns than investing in the stock market, and Canadian Guaranteed Investment Certificates currently have interest rates below two percent per year.