GIC fees

There are no fees or charges to buy or hold GICs. Your bank covers its costs when it sets its GIC rates. But you may have to pay a penalty if you want to cash in your GIC early.

Penalties for cashing in early

If you want your money back before the term ends, you may receive less interest or have to pay a penalty. Make sure you understand what these penalties are before you buy a GIC.

If you think you may need your money early, consider buying a cashable or redeemable GIC. You won’t have to pay a penalty to cash in these GICs early, but the interest rateInterest rate A fee you pay to borrow money. Or, a fee you get to lend it. Often shown as an annual percentage rate, like 5%. Examples: If you get a loan, you pay interest. If you buy a GIC, the bank pays you interest. It uses your money until you need it back.+ read full definition may be lower.

How banks make money selling GICs

When you investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition in a GIC at a financial institution, such as a bank, you lend it your money for a period of time. The bank pays you interest. At the same time, the bank is able to lend your money to others. The bank will charge a higher rate to those borrowing the money.

The bank makes money on the difference between the interest it pays to you, and the interest it charges to the borrowers. This is known as the spread. The money earned on the spread helps the bank cover its costs and make a small profit. So, even though there is no fee when you buy a GIC, the bank still makes money using your money.

Take action

Make sure you understand any penalties if you have to cash in your GIC early.

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