How to Buy a Canadian Certificate of Deposit

How to Buy a Canadian Certificate of Deposit
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Certificates of deposit are investment vehicles for individual customers. In Canada, these investment tools are called GICs, or guaranteed investment certificates. Consumers do not "buy" these products; rather, they use them as a low-risk investment. These accounts often have higher interest rates than standard savings accounts.

Calculate how much you can afford to invest in a Canadian GIC. These investment tools come with restrictions--namely that you cannot withdraw the funds from the account before a specified date. You need to make sure you have enough cash on-hand in your budget before investing.

Research banks who offer GICs. Most major Canadian banks--TD Canada Trust, ING Direct, Royal Bank of Canada--offer these products. The interest rates on the accounts vary based on market factors (strength of the economy). Rates are also determined by the term (length) of the GIC.

Decide how long you are willing to invest in a GIC. These accounts normally come with one-, two-, and five-year terms. The five-year GICs often carry the highest yielding interest rates. Banks reward customers who choose the long-term GIC as it allows the bank to freely use the funds for the entire period specified.

Review your other investments prior to enrolling. If you have mutual funds, stocks, retirement funds or IRAs, take a look at your returns on these investments to determine if investing in a GIC is worthwhile.

Contact the bank with whom you'd like to do business. Set up a secure electronic wire transfer to move the funds from your bank account to the GIC you've selected.