GICs come in two main types: cashable and non-redeemable. The right choice depends on how certain you are that you will not need the money before the term ends.
Cashable vs non-redeemable GIC comparison
| Feature | Cashable GIC | Non-Redeemable GIC |
|---|---|---|
| Early withdrawal | Yes (after lock-in period) | No |
| Interest rate | Lower (3.00%–3.50% typical) | Higher (3.80%–4.25% typical) |
| Lock-in period | Usually 30–90 days | Full term |
| Penalty for early withdrawal | Reduced interest rate | Not permitted |
| Available terms | Typically 1 year | 1–5 years |
| Best for | Uncertain timelines | Money you can lock away |
| CDIC insured | Yes | Yes |
How cashable GICs work
A cashable GIC lets you withdraw your principal before the maturity date. Most have a short initial lock-in period (30 to 90 days) during which you cannot access the money. After that period, you can cash out at any time, but you will typically receive a reduced interest rate on the withdrawn amount.
For example, a 1-year cashable GIC might pay 3.25% if held to maturity. If you cash out after 6 months, you might receive only 1.50% — or whatever the bank’s reduced early-withdrawal rate is.
How non-redeemable GICs work
A non-redeemable GIC locks your money in for the entire term with no option to withdraw early. In exchange for giving up flexibility, you earn a higher interest rate. These GICs are available in terms from 1 to 5 years.
If you need the money before maturity, you are generally out of luck. Some banks may allow early withdrawal under extreme circumstances (such as financial hardship), but this is at their discretion and you will likely lose most or all accumulated interest.
Rate comparison example
On a $10,000 GIC with a 1-year term:
| GIC Type | Rate | Interest Earned |
|---|---|---|
| Cashable | 3.25% | $325 |
| Non-redeemable | 4.00% | $400 |
| Difference | 0.75% | $75 |
The difference is $75 on $10,000 — not insignificant, but the real cost of cashability is modest for the flexibility it provides.
When to choose each type
Choose a cashable GIC when:
- You might need the money within the next year
- You are parking funds while deciding on a larger purchase
- You want a better rate than a savings account but need some flexibility
- Interest rates are rising and you may want to reinvest at a higher rate soon
Choose a non-redeemable GIC when:
- You are certain you will not need the money before maturity
- You want the highest guaranteed rate available
- You are building a GIC ladder with staggered maturity dates
- The money is earmarked for a specific future date (tuition, down payment, etc.)
Tax treatment of GIC interest in Canada
GIC interest is fully taxable as income in the year it is earned (or credited, for multi-year GICs under the “annual accrual” rule). This applies even if you don’’t receive the interest until maturity.
Annual accrual rule: For GICs with terms longer than one year, you must report accrued interest annually — not just when the GIC matures. Your financial institution will issue a T5 slip each year showing interest earned.
TFSA vs RRSP vs non-registered GICs:
| Account type | Tax treatment of GIC interest |
|---|---|
| TFSA | Tax-free — no annual reporting required |
| RRSP | Tax-deferred — taxed as income when withdrawn |
| Non-registered | Fully taxable each year at your marginal rate |
For most Canadians, holding GICs inside a TFSA is the most tax-efficient approach, particularly for higher income earners (marginal rates of 40%+).
Frequently asked questions
What happens if I need my money early on a non-redeemable GIC? Non-redeemable GICs cannot be broken under most circumstances before maturity. In hardship situations, some institutions may agree to break the GIC as a goodwill gesture, but are not obligated to. You may be required to pay a penalty (often forfeiting some or all of the interest earned).
Are GICs safe if a bank fails in Canada? GICs held at CDIC member institutions are insured up to $100,000 per depositor per insured category. This includes a separate $100,000 limit for GICs with terms up to 5 years. Credit union GICs are covered by provincial deposit insurance, which varies by province.
Do GICs compound? GIC compounding depends on the product terms. Most 1-year GICs pay simple interest at maturity. Multi-year GICs typically compound annually. A compounding GIC earns interest on interest, producing slightly higher effective yields than simple-interest equivalents.
How to decide: a practical framework
Ask yourself these three questions before choosing a GIC type:
1. Could I need this money before the term ends?
- Yes → cashable GIC or HISA
- Definitely not → non-redeemable GIC
2. Am I optimizing for the highest possible return?
- Yes → non-redeemable GIC (typically 0.20–0.50% higher rate)
- Somewhat → cashable GIC (competitive rate with flexibility)
3. What is my tax situation?
- Hold inside TFSA → non-redeemable GIC maximizes tax-free returns
- Non-registered → consider shorter terms (1-year) to manage annual accrual reporting
Verdict for most Canadians: A 1-year non-redeemable GIC inside a TFSA offers the best combination of yield, flexibility (annual liquidity at maturity), and tax efficiency. For emergency funds, a HISA is more appropriate than any GIC.
Consider a HISA as an alternative
If you need full flexibility and daily access, a high-interest savings account may be a better choice — see our GIC vs HISA comparison for a full analysis than a cashable GIC. HISA rates are competitive with cashable GIC rates, and you can withdraw your money at any time with no restrictions or penalties.
Use our GIC calculator to compare the returns on different GIC options.
More from the Savings hub: Best HISAs, GICs & Savings Accounts in Canada