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When looking for a GIC I get a table of options that looks something like this:

GIC search results

Is there any reason why I shouldn't go with the higest offered interest rate? E.g. in this case with HOME TRUST COMPANY? Is there any risk or are there other hidden costs?

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  • Do you have enough to meet the minimum? – JB King Oct 11 '14 at 19:27
  • @JBKing yes. Assume I'm investing 25K if that helps. – Guy Sirton Oct 11 '14 at 19:33
  • Minimum investment, investment term (how long), cashable or not – karancan Oct 11 '14 at 22:21
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You need to consider a few things:

  • Risk. Is the bank (HOME TRUST COMPANY) a large company with fairly stable assets, or are they at risk to go under? You probably don't have enough information to completely evaluate this, but you can do a little digging at least. Verify that they're insured at the CDIC link from Brian here, and even if they are I'd avoid a very risk bank as the insurance process may tie up your earnings for a period of time.
  • Other terms. Is this for the same exact GIC, or are there different minimum investment amounts? Do they have any costs associated with them? How easy is it to roll the GIC over to a new one when the certificate matures?
  • Ease of management. Will it end up taking you more time to manage the GIC from (wherever) than it would if you took a slightly lower rate at your primary bank (who presumably allows you to manage it with a few mouse clicks)? Do you have to mail a check somewhere and wait a week to see if their customer service gets back to you? Definitely do at least a little research to verify the bank doesn't have major customer service issues, particularly if it doesn't have a local branch.

However, if that's all equal, then yes, choose the highest rate. The rates will vary significantly at any one time, both because some banks need additional deposits more than others and have an easier/harder time getting them, and because rates change periodically - maybe they're going up, and HOME TRUST COMPANY simply has updated their offer more recently (or they're going down, and they're slower) than other banks.

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  • Thanks @Joe but aren't GICs insured by CDIC? So even if HOME TRUST goes under I'll still get my money back? My bank (RBC) lets me purchase any of these directly into my investment account so there's no additional complexity. – Guy Sirton Oct 11 '14 at 19:51
  • The principal is insured, but I don't believe the interest is, and it's quite a pain to deal with it if there is a loss - ie, you would probably not have access to your money for a period, possibly a significant one if there was a major set of cascading failures (see: 2008, or the S&L crisis in the 80s). – Joe Oct 11 '14 at 19:57
  • Check here for a list of insured members(HomeTrust is a member). Interest is insured as long as it's not over $100k total principal + interest. In theory a failure is seamless for the depositor, one day your money is in another bank. Not a lot of practice done in Canada though. – brian Oct 12 '14 at 21:46
  • Thanks @brian - updated the answer to reflect insurance. – Joe Oct 12 '14 at 23:38

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