Understanding whether your GIC is redeemable, non-redeemable or fully cashable is essential based on your goals. If you’re parking your rainy-day fund in term deposits, you'll want them to be liquid (readily available), so you can access your money in case of an emergency.
If you're using them to save for a purchase you know is five years away, you can keep your money working for you by locking it into a longer-term deposit with a higher rate. Often, this long-term strategy can be used to “purchase an income” in retirement for yourself or a family member.
In buying a GIC, you also get the option to have the interest compound, or to pay out monthly, quarterly, semi-annually, or annually. This can be a great way to help boost your income, especially if it’s limited already.
Redeemable GICs
A redeemable deposit means you don’t have to wait until the end of the term to take out your money. Make sure you pay attention to the conditions surrounding redeemable GICs. For instance:
- It might take 30 days or more before you have access to your funds
- You might only be able to redeem them on the anniversary date (e.g. after the first year of a three-year term)
- You might not get the full rate if you redeem early, but instead an early redemption rate
There are other possible conditions, so if you anticipate that you might need to access your money, ask your financial advisor before you purchase a redeemable GIC.
Some GICs are completely cashable, meaning that at any point during the term you can redeem them with no fees or penalties, along with whatever interest you've earned. Because of their flexibility, redeemable GICs will tend to have lower interest rates than non-redeemable GICs.
Non‑redeemable GICs
On the other hand, a non‑redeemable deposit means your money is locked in for a fixed period. This is a better option for your longer‑term goals where you want to store money away and not touch it for the entirety of the term.
