Interest rates are low.
But they’re not as low as you might think if you’ve only been looking at big bank rates for Guaranteed Investment Certificates (GICs).
Just look at these GIC rates from RBC:
0.15% for a one-year GIC! Why even bother?
Fortunately (sort of), this is just the big banks taking advantage of the fact that most of their customers will not shop around.
With a bit of work, you can find rates that are up much higher.
A credit union
One option is to check out a local credit union, or an entirely online one like Achieva Financial.
The one-year GIC rate at Achieva is 1.5%. Ten times the RBC rate! Even the daily savings rate at Achieva is higher than the 7-year GIC rate at RBC.
There is a difference in terms of deposit insurance between banks and credit unions. GICs at banks are insured by the Canada Deposit Insurance Corporation (CDIC), which is backed by the federal government. Credit union GICs are insured by provincial deposit insurance corporations. In the case of Achieva, it is the Deposit Guarantee Corporation of Manitoba, which is backed by the Manitoba government. The specifics of the coverage differs, so it’s worth looking into what would be better for your situation. Also, while both the federal and provincial guarantees are pretty safe, the federal one is a bit safer (worst case, the Government of Canada can print Canadian dollars).
A small bank
If you prefer to stick to a bank, there are options outside of the big six (RBC, TD, Scotiabank, BMO, CIBC, National Bank).
Smaller ones, like EQ Bank, need to offer higher rates to attract customers away from their larger competitors.
The last one-year GIC rate at EQ Bank is 1.2%. Eight times the RBC rate.
A discount brokerage
If you would rather stick with your big bank, then one option is to buy GICs through their direct investing (i.e., discount brokerage) platform.
It’s pretty straightforward with RBC Direct Investing. You just select the type of GIC you want (length of term and frequency of the interest payments).
Then you will get results for several financial institutions that you can sort from highest to lowest interest rates.
The highest one-year rate available is 0.68%. This is 4.5 times the rate available through RBC banking, although only about half the Achieva or EQ Bank rates.
But the highest 5-year GIC rate through RBC Direct Investing (1.44%) is fairly close to those at Achieva (1.75%) and EQ Bank (1.70%).
You won’t find the highest GIC rates at a big bank. You will need to shop around. Try a credit union, a small bank or a discount brokerage.