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What is Term Deposit? (AKA Guaranteed Investment Certificate)

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November 27, 2025 By Adam Long Comments are Off

A Smarter, Safer Way to Grow Your Money: Understanding Term Deposits (GICs)

Term deposits, commonly known as Guaranteed Investment Certificates (GICs), are having a major moment in Canada. Between shifting interest-rate expectations, updated CDIC coverage rules, and a rising demand for stable returns, Canadians are rediscovering the value of guaranteed savings products.
They’re simple. They’re predictable. And in a market full of noise, they offer something people value today more than ever: certainty.

What Is a Term Deposit and How Does It Work?

So, what is a term deposit? Why is it considered such a safe investment for many Canadians that are cautious about investing and looking for a risk-free way to reach their financial goals?
A term deposit is an investment product. It’s a deposit account at a financial institution that typically comes with a short-term maturity date—meaning that it matures (or is finished growing) in anywhere from one month to three years. But there are also term deposit products that come with longer terms, including deposits with five-year and (now with the latest Canadian Deposit Insurance Corporation (CDIC) changes) even 10-year maturities.
When purchasing a term deposit, an investor has two primary considerations: the interest rate and the term. A term deposit with a longer-term (or length of time) will almost always yield a larger interest rate. When a term deposit reaches maturity, the initial guaranteed investment is paid back to the investor, along with the interest the investment has made over the term.

Why Term Deposits Are Trending in Canada Right Now?

Across the financial industry, GICs are experiencing renewed popularity. The reasons are clear:

  • Expanded CDIC protection
  • Competitive promotional rates
  • Economic uncertainty driving demand for safer products
  • A shift toward deposit-led growth strategies for FIs

Consumers want reliable returns. Banks and credit unions want stable deposits. Term deposits sit right at the intersection of both needs.

How Does a Term Deposit Work?
When you open a term deposit, you typically choose:

  1. Term length – 30 days to 10 years
  2. Interest structure – fixed, variable, or step-rate

Example:
A $10,000 one-year GIC at 4% earns $400 at maturity.
Interest can be calculated annually, monthly, semi-annually, or compounded. The important part is understanding how your rate is calculated so you can anticipate your total return.

Types of GICs Available Today

Canadian financial institutions offer a diverse selection of term deposit products, including:

  • Fixed-Rate GICs
  • Variable-Rate GICs
  • Step-Rate GICs
  • Cashable / Redeemable GICs
  • Non-Redeemable GICs
  • Registered GICs (TFSA, RRSP, RESP, FHSA)
  • Foreign Currency GICs

This variety lets investors tailor their choice to their liquidity needs, risk tolerance, and long-term goals.

How Term Deposits Benefit Financial Institutions

Term deposits provide financial institutions with predictable, low-cost funding for lending activities such as mortgages and loans.
The bank pays interest to depositors, lends the capital at a higher rate, and earns revenue from the interest rate spread. This makes term deposits a strategic tool for deposit growth, balance sheet stability, and long-term planning.

Why Term Deposits Are a Safe Investment Option

Term deposits are considered one of the safest, lowest-risk investment options available to Canadians because they offer:

  • Guaranteed principal
  • Guaranteed return
  • CDIC protection up to $100,000 per category
  • Zero market exposure

For conservative investors — or anyone seeking balance in their portfolio — term deposits offer clarity and confidence in uncertain times.

Final Thought

Term deposits won’t deliver the thrill of high-risk investing — and that’s exactly why so many Canadians trust them. When the market feels unpredictable, the reassurance of guaranteed growth becomes far more valuable.

Want to Learn More About GICs and Term Deposits?

If you’re building financial knowledge, explore more articles on the Portfolio+ Blog.

For financial institutions, Portfolio+ provides modern software and APIs that make it easier to manage, automate, and scale your term deposit operations. If deposit strategy is a priority for your institution, our team can help.

References & Further Reading

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