Interest rates on guaranteed investment certificates are on the rise, but so slowly and incrementally you can easily miss the action. So let’s update you on the latest in the one-year GIC, where there continues to be value for investors who want a safe parking place for money they’ll need in the medium term.
Inflation has been on a mild rising trend in the past 12 months – can one-year GICs keep up? According to Bank of Canada data, the inflation rate over the past 12 months has averaged 2.8 per cent. As of early October, several alternative players in banking sector offered just enough of a return to beat inflation. Here they are, listed alphabetically.
1.) Accelerate Financial: This arm of a Manitoba credit union is offering 2.85 per cent. Deposit insurance comes from a provincial plan, not Canada Deposit Insurance Corp.
2.) EQ Bank: This online bank has been jousting with rival Oaken Financial to attract deposits. The current rate is 2.91 per cent. CDIC protection.
3.) Hubert Financial: Similar to Accelerate – an online bank operated by a credit union that offers 2.85 per cent on one-year GICs.
4.) Oaken Financial: A one-year GIC rate of 2.9 per cent and CDIC coverage.
5.) Small credit unions: Worth a look. According to Cannex.com, some were offering 3 per cent in early October. The rarely serve clients out of their area.
Now for some runners-up. One-year GIC rates at Simplii Financial and Tangerine were 2.75 per cent at the beginning of October, which basically rounds up to that inflationary threshold of 2.8 per cent. If you’re nervous about dealing with small online banks you’re not familiar with, Simplii and Tangerine seems a decent compromise for one-year GICs.
Note to investors: You’ll have to deal with most, if not all, of these GIC players directly. While online brokerage firms typically offer GICs from third-party issuers, the banks and credit unions with the best rates are usually not included.