Cashable vs Non-Redeemable GICs: What Early Access Costs

The main choice when buying a GIC is whether you can get the money out before maturity. A non-redeemable GIC locks it in and usually pays more; a cashable or redeemable GIC lets you out early and pays less for that option. This page covers how each works and how to weigh the trade-off. The GIC hub lists every GIC guide.

The three redemption types

Institutions use “cashable” and “redeemable” in slightly different ways, so the early-redemption clause in the product terms is what counts.

How cashable GICs work

A cashable GIC has a short initial period, often 30 to 90 days, when the money can’t be touched. After that it can be cashed at any time. Many cashable GICs are sold for 1-year terms. If you cash out early, you usually get the principal back plus interest for the time held, sometimes at a reduced rate.

Example. A 1-year cashable GIC pays 3.25% if held to maturity. Cashed after 6 months at a reduced early-redemption rate, it might earn well under half the full-year interest. The product terms say what rate applies.

How non-redeemable GICs work

A non-redeemable GIC holds the money for the whole term, commonly anywhere from 30 days to 5 years. Some institutions release funds early on the holder’s death or, at their discretion, in hardship, usually with little or no interest paid. Otherwise the money comes back only at maturity.

What the flexibility costs

The cost of a cashable GIC is the rate gap times the amount times the time held. With illustrative rates on a $10,000 1-year GIC:

The gap varies by institution, term and rate cycle; compare the two posted rates for the same term at the same institution. The best GIC rates page lists current non-redeemable rates, and the GIC calculator turns any rate into dollars.

Which suits which savings

Cashable GICs tend to suit:

• Money that might be needed within the term
• Savings parked while a larger decision is pending
• Periods when rates are rising and you may want to reinvest at a higher rate soon

Non-redeemable GICs tend to suit:

• Money earmarked for a specific future date (tuition, a down payment)
• Savings you are confident you won’t touch
• The rungs of a GIC ladder, where one GIC matures each year and gives regular access without early redemption

A ladder of non-redeemable GICs gives yearly access at non-redeemable rates, which is why ladders are often built instead of buying cashable GICs.

Tax does not depend on the type

Cashable and non-redeemable GICs are taxed the same way: interest is income, taxed each year as it accrues in a non-registered account and sheltered inside a TFSA or RRSP. The guide to how GIC interest is taxed covers the annual accrual rule and T5 slips.

Safety does not depend on the type either

Both types are deposits, insured by CDIC up to $100,000 per category at member institutions, or by provincial insurers at provincially regulated credit unions. Are GICs safe? explains the categories.

When a HISA is the better comparison

If the money might be needed at any moment, the real alternative to a cashable GIC is a high-interest savings account, which has no holding period at all. The GIC vs HISA comparison weighs the two.

More from the savings hub: Savings accounts explained