The best TFSA GIC rates

The best overall GICs in Canada

Are you looking for a safe and secure way to save money while earning competitive rates? A TFSA GIC may be the perfect solution for you.

A TFSA GIC is a savings product that offers guaranteed returns on your investment, while also providing the added benefit of tax-free growth. Find out more about the best TFSA GIC rates.

Best TFSA GIC rates

The best TFSA GIC rates in Canada are currently offered by the following banks and financial institutions:

• EQ Bank registered GICs
• Oaken Financial registered GICs
• TD Bank registered GICs
• Saven Financial registered GICs
• Meridian Credit Union registered GICs

While many digital banks offer competitive GIC rates, not all allow you to hold them in registered accounts like TFSAs. Most major banks do, though.

What are TFSA GICs?

TFSA GICs are Guaranteed Investment Certificates (GICs) that can be held in a tax-free savings account. TFSAs are tax-sheltered registered accounts, so the interest you earn on a GIC will not be taxable, unlike with GICs held in non-registered accounts. But you are limited to a maximum annual contribution amount and total lifetime contribution amount for a TFSA.

• Also read: GICs in TFSAs 

Find your annual TFSA contribution room limit with Ratehub's TFSA contribution room calculator.

GIC vs. TFSA

A GIC is a term deposit that allows you to earn interest on a sum of money for a predetermined length of time: 1, 2 or 5 years for example. You generally hold a GIC in a savings account or investment account. A TFSA is a government-registered savings account that is tax-sheltered, meaning you won’t be taxed on interest earned or investment gains. TFSAs can be used as a savings or investment account, and are often used for retirement savings or another financial goal.

If you are looking to add stability to your investment portfolio, a GIC is a good choice. There are other alternatives like bonds, too, though. If you want to use a GIC for a short-to-medium term savings goal, you can hold it in a registered savings account that doesn’t penalize you for withdrawals like a TFSA or FHSA if you’re saving for a down payment on a home. Keep in mind with non-redeemable GICs, which tend to pay the highest rates, you can’t take your money out before the end of the term you agreed to without penalty. Many people like this aspect of GICs, though, because it prevents them from spending the money on something else and sticking to their savings goal. If you choose a cashable GIC, you can withdraw your investment any time after 30 days without penalty, and you’ll still be paid interest on your investment until you cash it out. You’ll generally get a lower interest rate on cashable GICs, though, unless you find a promotion.

However, if you choose to hold the GIC in an unregistered account you will be taxed on any interest earned throughout the term. With a TFSA on the other hand, you can deposit your savings and hold it in the account until you need to cash it out without penalty, and you won’t lose contribution room. You also won’t be taxed on interest earned. Many TFSAs earn interest in the 4% range, currently, which is slightly less than GICs. The choice you make depends on your timelines and financial goals.

How to Choose the Best TFSA GIC for You

When choosing the best TFSA GIC for your savings goals, it’s important to consider the following factors:

1. Interest Rate

The interest rate is a crucial factor to consider when choosing a TFSA GIC. Look for rates that are higher than the current inflation rate to ensure your money is growing in value.

2. Term Length

TFSA GICs offer a range of term lengths, from 1-5 years. Consider your savings goals and choose a term length that aligns with your timeline.

3. Early Withdrawal Penalties

While TFSA GICs are meant to be held until maturity, unexpected circumstances may arise where you need to withdraw your funds early. Be sure to understand the penalties associated with early withdrawals before choosing a TFSA GIC.

4. Insurance Coverage

Ensure that the financial institution offering the TFSA GIC is a member of the CDIC, which provides insurance coverage for deposits up to $100,000.

How to Open a TFSA GIC

Opening a TFSA GIC is a simple process. Here’s how to get started:

1. Choose a Financial Institution

Research and compare TFSA GIC rates from different financial institutions to find the best option for you.

2. Gather Required Documents

You will need to provide personal identification, such as a driver’s license or passport, and your Social Insurance Number (SIN) to open a TFSA GIC.

3. Complete the Application

Once you have chosen a financial institution, you can complete the application process either online or in-person.

4. Fund Your TFSA GIC

You can fund your TFSA GIC with a lump sum or set up regular contributions from your bank account.

Tips for Maximizing Your TFSA GIC Returns

To make the most of your TFSA GIC investment, consider these tips:

1. Maximize Your Contribution Room

Each year, the Canadian government sets a limit for how much you can contribute to your TFSA. Be sure to max out your contribution room each year to make the most of your tax-free savings account. If you’ve under-contributed or never contributed to your TFSA before, you’ll have more contribution room than the standard annual contribution limit ($7,000 in 2024).

2. Consider Laddering Your GICs

GIC laddering is a strategy that involves  investing in multiple GICs with different maturity dates, and then reinvesting the earnings from GICs at their maturity. This strategy allows you to take advantage of higher interest rates while still having access to your funds at different intervals.

Can you withdraw your cash when a TFSA GIC matures?

If you do want access to the money once the GIC matures and withdraw the funds as cash, your TFSA contribution room will be impacted. And it's important to understand how.

When you make a withdrawal from a TFSA, you’ll temporarily lose the contribution room and won’t get it back until the start of the next calendar year. We've created a handy contribution room calculator to let you quickly see how your personal TFSA limit is impacted by withdrawls, but let’s also run through a step-by-step example:

• Let’s say Jon had $20,000 in TFSA contribution room available for 2020 with $5,000 invested in a GIC TFSA
• If Jon’s GIC matured in 2020 and he withdrew the $5,000 as cash, his total TFSA contribution limit would remain to be $20,000. But if Jon decided to reinvest the $5,000 back into his TFSA within the same year, his limit would now fall to $15,000 (withdrawing your funds from a TFSA doesn't change the total amount of room you have available for the current year and your limit won't increase to offset any withdrawals made in the same year).
• At the start of 2021, Jon would've regained the $5,000 in contribution room, increasing his TFSA room from $15,000 back to $20,000. On a separate note, he would’ve also gained $6,000 in new contribution room for 2021 (TFSA contribution limits for new deposits increase every calendar year; regardless of past withdrawals or deposits).

Understanding how GIC TFSA withdrawals work is important since you’ll want to avoid accidentally overcontributing to your TFSA as doing so can result in fines.  

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