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Difference Between Term Deposit and GIC

dollar-billTerm Deposit vs GIC

Term Deposit and Guaranteed Investment Certificate (GIC) are very similar because they are secured investment instruments. These types of portfolios are preferred by conservative investors who want guaranteed returns. However, you have to understand their slight differences so you can better decide which one would be suitable for you.

One of the most noticeable differences between term deposit and guaranteed investment certificate is the length of time required to lock-in your investment. Normally, a term deposit has shorter investment period of 30 days to 364 days. Guaranteed investment certificate, on the other hand, is usually locked-in for at least 1 year or up to 5 years.

Because of the amount of time required to invest your funds, banks usually offer higher interest rates for guaranteed investment certificate. So your investment earns more but you can not touch your money for very long periods. Meanwhile, a term deposit normally has lower interest rate but the maturity of the investment is shorter. Thus you can en-cash your investment much faster.

Term deposits are also pre-encashable even before the maturity period. In contrast, GIC or guaranteed investment certificate is locked-in and is not redeemable before the term matures. Rates are fixed for term deposits until the investment matures. Guaranteed investment certificates on the other hand can have fixed rates or variable rates especially if the portfolio is tied to another investment such as the stock market.

With term deposit, you will only have two choices: short-term or long-term deposits. If you purchase a guaranteed investment certificate, you can have lots of options such as market linked GIC, flexible, cashable, or escalator GICs.

In general, bankers and investment experts really do not differentiate term deposits from GIC. They treat it as one and the same. But slight differences in terms, maturity, and rate structures are important to understand so you can choose which instrument is more appropriate for you.


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