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Guaranteed Investment Certificates (GICs)



Frequently asked questions

  • What are GICs?
    A Guaranteed Investment Certificate (GIC) is a kind of investment that guarantees the money you put into it, no matter what happens in the market. There are lots of different types, but typically GICs have a fixed term, and you can’t cash them out until the term is up. What’s more – you’ll know exactly how much you’ll have at the end of the term because they usually have a fixed rate of return too.
  • Are GIC returns taxed?
    It depends – on what kind of account they’re in. If they’re in a registered account like an RRSP or TFSA, the money they earn won’t be taxed. If they’re in a non- registered account, the returns are taxed just like any other income.
  • How are GIC returns taxed?
    If your GICs aren’t in a registered account, they’re taxed the same way any other income is taxed by the CRA. If you have a multi-year GIC that isn’t sheltered, the interest you earn on each anniversary will be taxed, even if it hasn’t been paid to you yet. So that’s important to keep in mind!
  • Can I redeem GICs before they mature?
    Sure. If you have cashable (also called redeemable) GICs, you can redeem them before the end of the term. There might be limitations on exactly when they can be redeemed, depending on which GIC you have. Non-cashable GICs can’t be cashed before they mature without a penalty.
  • What are cashable GICs?
    Cashable (or redeemable) GICs give you the option of withdrawing money before the end of the term. This is handy if, for example, your investment plans change before the term is up, or you need some disposable cash. How much you can redeem and when, as well as how early redemption will affect your returns, depend on which cashable GIC you choose.
  • What are non-cashable GICs?
    Non-cashable GICs are term investments which can’t be cashed before the end of their term. They do have an advantage over cashable GICs though, as they usually offer higher rates of return.
  • What is the current GIC interest rate?
    It depends. Rates vary from one GIC to another, based on product features, term, and cashability, as well as the current interest rates set by the Bank of Canada. Then there are market- and fund-linked GICs, whose returns depend on how well the market or fund they are linked to is doing. A BMO Investment Professional can help you find a GIC with a combination of features and returns that works for you. View all GIC products and rates
  • GICs vs Mutual Funds: What’s the difference?
    They’re quite different, actually. The main difference is that with GICs the money you put into them, and often your return, is guaranteed. This makes them very secure compared to Mutual Funds. Because risk often goes hand in hand with reward though, Mutual Funds may have the potential to earn higher returns than GICs.There are other differences too. GICs typically have a fixed term during which you can’t access your funds or, in the case of cashable GICs, there may be limitations on when you can cash them. Mutual Funds don’t have these restrictions. And Mutual Funds are actively managed, so they have management fees associated with them, which GICs don’t.

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* Not compounded. BMO Smart Return GICs are issued by Bank of Montreal Mortgage Corporation and guaranteed by Bank of Montreal. The principal amount of a BMO Smart Return GIC is guaranteed and is repayable upon maturity, and in addition, the GIC provides a minimum guaranteed rate of return, but there is no guarantee that you will receive any additional return based upon the performance of the underlying investments. The rate of return for the term payable is the return on the Reference Portfolio, but will not be less than the Guaranteed Rate of Return for the Term or more than the Maximum Rate of Return for the Term. The return on the Reference Portfolio, if any, is determined without reference to any dividends or distributions paid on the securities in the index and is the simple average of the percentage changes in (i) the value of each index in the Reference Portfolio as of the market close 2 business days after the issue date of the GIC, and (ii) the closing values of each index on the calculation date set out in the Terms and Conditions for the GIC. The rate of return for the term is not an annual rate but is the rate of return over the entire term of the GIC. If market disruptions or other special circumstances affect the calculation of the return, the calculation agent may adjust or delay the calculation or payment of interest, estimate the value of the underlying index or a security in the underlying index, replace a security or the underlying index and/or determine the amount of interest, if any, that may be payable in an alternate manner. The rate of return, if any, is based on a price return index, not a total return index. CDIC coverage applies for terms of 5 years or less for CAD GICs, up to applicable limits. Visit www.cdic.ca for more information. The Terms and Conditions for BMO Smart Return GICs are available at your local BMO Bank of Montreal branch.