💰 Finance

How do fixed-term deposits in Canada work?

By FastBuySale Newsroom · 5 Nov 2026 · 18m ago

Quick answer

Fixed-term deposits in Canada explained for beginners: how GICs and term deposits work, what banks must disclose, cashing in early, automatic renewals, the 10-business-day cancellation right and CDIC deposit insurance up. GICs and term deposits return your principal at the end of the term.

📌 Key points

GICs and term deposits return your principal at the end of the term.
Term deposits generally have shorter terms than GICs.
Banks must disclose the rate, term, charges, early-cash-in rules and CDIC status before you buy.
You can cancel an automatic renewal within 10 business days of the new term starting.
CDIC covers eligible deposits, including GICs, up to $100,000 per category per member institution.
CDIC does not cover mutual funds, stocks, bonds, ETFs or crypto.

How GICs and term deposits work

Fixed-term deposits in Canada come in two main forms: Guaranteed Investment Certificates (GICs) and term deposits. Both are secured investments, which means you get back the amount you invest at the end of the term, plus any interest the product pays. According to the Financial Consumer Agency of Canada (FCAC), the key difference between them is the length of the term: term deposits generally have shorter terms than GICs.

In plain terms, you agree to leave a sum with a bank, credit union or trust company for a set period. In return, the institution pays interest at a rate that is either fixed for the term or variable and linked to a reference rate such as prime. The Canada Deposit Insurance Corporation (CDIC) describes buying a GIC as loaning money to the institution that issued it, in exchange for principal protection and the potential for interest over the term.

You pick an amount, a term and an interest type. At the end of the term the principal is repaid, and interest is paid according to the product's terms. The FCAC lists short-term GICs and short-term deposits among options for goals two years or less away, such as an emergency fund or a major purchase, where the focus is keeping money protected and accessible. Long-term GICs and long-term deposits appear on its list of options for goals six years or more away.

Fixed vs variable rate: with a fixed rate, the institution must tell you the annual rate of interest. With a variable rate, it must explain how the rate is calculated, which reference rate it uses (for example, the prime rate), the actual rate at the time of disclosure, and how you can find out the rate during the investment period.

Cashable or not: some products can be cashed in before the end date and some can't. If yours can, the institution must tell you how cashing in early affects the interest you earn.

Where to buy: CDIC says you can buy CDIC-protected GICs straight from member institutions or through a third party, such as a broker or investment advisor, if they are issued by a member institution.

A hypothetical illustration (not a quoted rate): $10,000 in a three-year GIC at a fixed 4% a year, compounded annually, would grow to about $11,248.64 at maturity, or $1,248.64 of interest. At 4% simple interest paid out each year, you would receive $400 a year, or $1,200 in total. How interest is calculated and paid is one of the details the institution must disclose.

Keep inflation in mind. The FCAC lists the risk that the value of your investments won't increase enough to keep up with inflation as one of the risks investors face. Compare a quoted rate against price rises with our

What your bank must tell you before you buy

Federally regulated financial institutions must give you key details before selling you a GIC or term deposit, in a manner and language that is clear, simple and not misleading. At or before the agreement, this includes: the term; how and when principal is repaid; how and when interest, if any, is paid; the rate or how a variable rate is set; any charges and their impact on interest; whether you can cash in early; any risks, including if no interest is accumulated; and whether CDIC will insure the product.

Trust and loan companies must also disclose the dates the investment period begins and ends.

Automatic reinvestment: if the institution can reinvest your funds without a new agreement, it must explain the details that would apply: fixed or variable rate, the actual rate or how it is calculated, the investment period, whether and how you can cancel, and whether it can change a term or condition.

Buying by phone, online or by mail: by telephone, the information must be given verbally before the agreement and in writing without delay afterwards. Electronically or by mail, it must be given in writing beforehand, along with the phone number of someone knowledgeable about the product.

Under the Financial Consumer Protection Framework, banks must also provide a website or phone number where you can get the current interest rate on a deposit-type instrument such as a GIC.

Changes and current value: before changing any terms, the institution must tell you in writing about the change and its potential impact on your interest. If you ask for the current value, it must tell you without delay the principal and any interest earned to that day.

Cashing in early, renewals and rollovers

Before you cash in a product before its end date, the institution must tell you the principal and interest earned, the amount of any penalty or charge for cashing in early, and the net amount you'll receive. Ask for this figure before you decide.

Automatic renewal: a federally regulated institution may automatically reinvest your funds at the end of the original term. You can cancel this new investment within 10 business days of the start of the new term. Check your original agreement or contact the institution to find out how.

Renewal notices: for a product with a term of more than 30 days, banks must disclose renewal or rollover information 21 days and again 5 days before the last day of the term. For a term of 30 days or less, they disclose it 5 days before the end. The notice must include the interest rate that will apply, any charges or penalties, your rights and obligations, and the period in which you can cancel.

Tip: put the maturity date in your calendar. When the renewal notice arrives, compare the renewal rate with what's on offer elsewhere before the 10-business-day window closes.

Where to hold it: the FCAC lists registered plans such as RRSPs, RESPs, RDSPs and TFSAs among longer-term savings options. Ask your institution whether a GIC can be held inside the plan you are using. If you are saving for retirement, model the timeline with our

Deposit insurance: is my GIC protected?

The CDIC covers eligible deposits at member institutions. You don't need to apply or pay for it, and you don't need to file a claim if your institution fails; CDIC pays you automatically.

CDIC covers eligible deposits separately for up to $100,000, including savings and chequing accounts, GICs and other term deposits, and foreign currency such as US dollars. It does not cover mutual funds, stocks, bonds, ETFs, cryptocurrencies, or losses due to fraud or theft.

Coverage is per category, per member institution. In CDIC's example, William holds a $90,000 GIC and $20,000 cash in his own name at institution A: $110,000 of eligible deposits, of which $100,000 is protected. At institution B he holds GICs of $80,000 and $20,000, both protected, for $200,000 of coverage across the two members. His mutual funds, stocks and bonds are not eligible.

Through a broker: GICs placed in your name are combined with your other deposits in the same category at that member. GICs held in the broker's name as your nominee are treated as deposits held in trust and, if the broker follows disclosure rules, are protected separately up to $100,000 per beneficiary. CDIC suggests asking who issued the GIC, whether the issuer is a CDIC member, whether the GIC is eligible, and whose name it is held in.

Credit unions, trust and loan companies and caisses populaires that are provincially regulated are covered by provincial deposit insurance plans, which vary by province.

💡 What's in it for buyers

Choose a term that matches your goal date.
Ask whether the GIC is cashable and what early cash-in costs.
Confirm the issuer is a CDIC member or provincially insured.
Diarise the maturity date and review the renewal notice.

FAQs

What is the difference between a GIC and a term deposit?

Both are secured investments that return your principal at the end of the term. The FCAC says term deposits generally have shorter terms than GICs.

Can I take money out of a GIC early?

Only if the product allows it. The institution must tell you how cashing in early affects your interest, and before you cash in, the penalty and the net amount you'll receive.

Can I cancel an automatic GIC renewal?

Yes. With a federally regulated institution, you can cancel within 10 business days of the start of the new term.

Are GICs covered by CDIC?

Eligible GICs at CDIC member institutions are covered up to $100,000 per eligible category, per member institution, combined with your other eligible deposits in that category.

Is a GIC bought through a broker insured?

It can be, if a CDIC member issued it and it is held in an eligible category. Ask who issued it and whose name it is held in.

Does deposit insurance cover credit unions?

Provincially regulated credit unions, trust and loan companies and caisses populaires are covered by provincial plans, which vary by province.

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