4 Effective Ways to Maximize GIC Returns


Guaranteed investment certificates (GICs) have always been a smart investment. While they may not offer returns as large as others such as stocks and bonds, they are safer, providing the investor with their original investment plus a little bit of interest depending on the term agreed to.

While interest rates across the country are similar, there are still many steps you can take to maximize the return that you receive on your GIC once you cash out or the term ends. Below are some of the ways you can get the best GIC return possible.

1. Secure the highest interest rate

The return on your GIC is composed of your initial investment plus any interest earned. Therefore, it only makes sense to secure the highest interest you can. Otherwise you will not get much more than your investment, making the whole process a waste of time overall.

To get the highest interest rate possible, determine what the going rate of GICs currently is. Then you can check with a few lenders that offer GICs. It may be tempting to purchase GICs from the institution that you do most of your business with. However, it is beneficial to look around before agreeing to anything. While most GICs offer similar interest rates, even a difference of less than 1 percent can mean a better return especially on ones that are longer-term.

2. Do not cash out early

There are many reasons why you may want or need to cash out early on your GIC. You may have an emergency that you need to pay for. You may want to make a larger purchase such as a vacation, vehicle, or home renovations. However, doing so will negate any gains you have made with your GIC, making the whole ordeal hardly worth it.

Because GICs are guaranteed, the return that you usually get are already noticeably lower than other investments such as stocks or bonds. As a result, you definitely will not get much more than your initial investments if you cash out early. Even if you are cashing out with some gains, penalties for early withdrawals may impact them significantly.

3. Consider a broker

As mentioned, one of the biggest factors that influence the return you will receive on your GIC is the interest rate you secure. Therefore, you need to get the highest one available. One effective way of doing this is using the services of a deposit broker.

A deposit broker, like a mortgage broker, shops the market to secure the best rates for clients. However, unlike a mortgage broker that shops for the lowest interest rates, a deposit broker secures the highest rates. Deposit brokers have access to almost 2000 different lenders that offer GICS, maximizing the chances of you finding a good interest rates. You also do not have to pay for the services of a broker. Fees are paid by the lender that the broker purchases the GIC from.

4. Go online

Historically, people looking to purchase GICs were restricted to getting them from institutions such as banks and credit unions. However, advances in technology have allowed people to do some research before making purchases and this has allowed people to maximize returns dramatically.

There are many smaller banks, credit unions, and private companies that offer GICs at better rates than larger institutions. Although they remain obscure and do not advertise much, you can easily find them by visiting web pages that aggregate and display interest rates from these lenders. As a result, you can compare many different rates from lenders all over the country.