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Cashable GICs combine the guarantees of traditional GICs with the flexibility to access your money prior to maturity. Learn how they work and how to buy.
Canadian investors have been struggling with high inflation for a couple of years now. In an attempt to cool inflation down, the Bank of Canada (BoC) continues to keep interest rates high. As a result, the interest rates available for guaranteed investment certificates (GICs) look to be pretty attractive—above 5% for certain types of GICs. While people often think of GICs as “locking in” your money, there are several types of GICs suitable for different types of investors, including cashable/redeemable ones. Simply put, a cashable GIC is a flexible GIC—one that you can sell and convert to cash even before it matures.
Traditionally, GICs offer Canadian investors three core benefits:
In addition to these three core benefits, a cashable GIC offers investors the option of getting their money back even before the term of the GIC has ended, if they so choose. For example, as of Dec. 14, 2023, you could buy a one-year cashable GIC from Scotiabank at an interest rate of 2.85%. If you need your money back sooner than anticipated, you can redeem the GIC. There is no interest penalty for cashing out early—so you will get the interest earned to date—but you must hold the GIC for at least 30 days before you can do so. Cashable or redeemable GICs offer investors great flexibility but note that banks typically offer higher rates for non-redeemable GICs—currently even 5% for a one-year GIC, as shown in the table below.
| 1-year non-redeemable GIC (paid annually) |
1-year non-redeemable GIC (paid semi-annually) |
1-year cashable GIC (paid at maturity) |
|
|---|---|---|---|
| Interest rate | 5% | 4.92% | 2.85% |
| Redeemable early | No | No | Yes |
| Eligible for registered accounts | Yes | Yes | Yes |
| CDIC-eligible | Yes | Yes | Yes |
Here are some reasons why cashable GICs may be a good investment:
Given these benefits, a cashable GIC may be suitable for an investor who wants to combine the benefits of traditional GICs—like principal protection and a guaranteed interest rate—with the flexibility of cashing out anytime. (Note, however, that if you redeem within 30 days of the GIC’s issuance, you will forfeit the accumulated interest.)
If you’re saving up to buy a car or a home, for example, GICs are a safe and reliable way to grow your money and access it when you need it.
Canadians are accustomed to transferring their investments from one institution to another if needed—say, from one bank to another. However, unlike mutual funds, exchange-traded funds (ETFs) and stocks, GICs typically cannot be transferred. This is because a GIC is a contract between you and the institution, and each institution offers its own GIC interest rates, terms and conditions. So, if you’re buying a GIC, be prepared to hold it at the financial institution where you bought it. If you have a cashable GIC and you need to move your investments to another institution, you could cash in the GIC and reinvest the cash in a GIC at the new institution.
If the ability to access your cash early is what you need, here are two options available through Scotiabank:
| Cashable GIC | Personal redeemable GIC | |
|---|---|---|
| Minimum investment amount | $500 | $500 |
| Term | 1 year | 2 years |
| Annual interest rate | 2.85% | 4.75% |
| Partially or fully redeemable | Fully or partially | Fully or partially |
| Investment fees | No | No |
| Principal protection | Yes | Yes |
| Guaranteed interest rate | Yes | Yes |
| Eligible for registered accounts | Yes | Yes |
| CDIC-eligible | Yes | Yes |
Cashable GICs are typically available wherever you buy your other GICs. For example, you can purchase Scotiabank GICs, including cashable/redeemable GICs, through a Scotiabank advisor. Book an appointment with an advisor online or by phone. Read more about Scotiabank GICs.
If you’re looking for a safe investment to park some money away for a short-term purchase, and if you prefer flexibility over a higher interest rate, then cashable GICs could be the way to go.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers.
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