Compound vs. simple interest: why the type matters more than the rate
A compound GIC reinvests each year's interest straight into the principal and pays out nothing until the GIC is cashed or matures — some banks compound semi-annually or monthly rather than annually, but the mechanic is the same: interest earns interest. An annual-pay (simple-interest) GIC instead pays that year's interest out in cash every year without adding it to the principal, so the balance stays flat and the dollar amount earned never grows. A monthly-pay GIC exists too, usually at a lower posted rate and a higher minimum deposit than an annual or semi-annual product. Comparing two GICs at the same headline rate without checking which type you're looking at is a common way to underestimate what a multi-year deposit is actually worth.
Worked example — $10,000 non-registered, 3 years at 4.00%, compounding annually, Ontario
Year 1: the opening balance of $10,000.00 earns 4.00% = $400.00, reportable that tax year under the CRA's anniversary-day rule, bringing the balance to $10,400.00. Year 2: $10,400.00 × 4.00% = $416.00, balance $10,816.00. Year 3: $10,816.00 × 4.00% = $432.64, maturity value $11,248.64. Total interest over the term is $1,248.64 — but it's reported across three separate tax years, not lumped at maturity, even though nothing is actually paid out until the GIC matures. At a 29.65% marginal rate (this calculator derives yours from the shared take-home pay engine), after-tax interest is $281.40, $292.66 and $304.36 in years 1 through 3 — $878.42 in total, versus $1,248.64 pre-tax, even though the cash to pay that tax has to come from somewhere else until the GIC actually pays out.
Worked example — $25,000 in a TFSA, 5 years at 3.75%: compounding vs. simple
Compounding annually: $25,000 × 1.0375⁵ = $30,052.50 at maturity, $5,052.50 in total interest. Paid out annually instead, never reinvested: a flat $937.50 a year, every year, for $4,687.50 collected in cash over five years, with the account itself still sitting at $25,000 the whole time. The compounding advantage here is $365.00 — money that exists purely because interest was left to earn interest instead of being paid out along the way. Since this example is inside a TFSA, both figures are entirely tax-free; the comparison is pure compounding mechanics, no tax involved.
Worked example — a $50,000 five-rung ladder
Split into five $10,000 rungs at rates of 3.50% (1yr), 3.60% (2yr), 3.70% (3yr), 3.80% (4yr) and 4.00% (5yr), each compounding annually to its own maturity: $10,350.00, $10,732.96, $11,151.58, $11,608.86 and $12,166.53. Because the five rungs mature on five different calendar dates rather than all at once, the $56,009.93 ladder total is a nominal sum across those dates, not a single point-in-time account balance — but it's still $6,009.93 of interest across the whole ladder, with a portion of the money freed up on a predictable annual schedule instead of locked away for five years at once.
The CRA's anniversary-day accrual rule
Since a compound GIC held more than a year pays nothing out until it matures, it would be easy to assume tax is only owed at maturity too — it isn't. The CRA requires interest income on a compound investment to be reported each year as it accrues, on the anniversary of when it was acquired, whether or not any T5 slip was issued for that year (a payer only has to issue one when it pays $50 or more to a recipient in a year; the recipient must still report every dollar regardless). A GIC bought partway through a year and maturing five years later might not generate its first T5 until the second calendar year, once the first full anniversary has passed, with T5s following for each year after that. The practical effect is a cash-flow mismatch worth planning around: tax comes due annually on money you can't actually touch until the GIC matures.
TFSA, RRSP/RRIF, FHSA or non-registered
The account the GIC sits inside changes the tax treatment entirely, not the GIC itself. A TFSA shelters the interest completely — no annual reporting, no tax ever, subject to your own contribution room (not modelled here). An RRSP or RRIF defers the tax: interest compounds without being taxed as it accrues, and is only taxed, as ordinary income, when you eventually withdraw it — which could be decades away or next year, and at whatever your marginal rate is then, not now. An FHSA behaves like a TFSA for growth purposes — interest compounds tax-free inside it — with the more complex questions (deductible contributions going in, a qualifying home-purchase withdrawal, or a non-qualifying one) outside this calculator's scope. A non-registered account gets none of that shelter: the anniversary-day rule applies in full, every year, at your marginal rate that year.
CDIC vs. provincial credit-union deposit insurance
CDIC insures GICs of any term at member banks and federally regulated trust and loan companies, up to $100,000 (principal plus interest) per depositor, per institution, separately in each of nine categories — including RRSP, RRIF, TFSA, RDSP, RESP and FHSA as their own categories alongside a plain one-name or joint deposit. It does not cover credit unions or caisses populaires at all, which instead answer to their own provincial deposit insurer. Several of those are far more generous than CDIC: British Columbia's CUDIC, Alberta's CUDGC, Saskatchewan's CUDGC and Manitoba's DGCM all guarantee credit-union deposits with no dollar limit. Ontario's FSRA caps non-registered deposits at $250,000 but leaves registered deposits (RRSP, RRIF, TFSA and the rest) uncapped; New Brunswick, Nova Scotia and Newfoundland and Labrador each cap coverage at $250,000 per category; Prince Edward Island caps non-registered deposits at $250,000 and covers registered deposits (RRSP, RRIF, TFSA, FHSA) in full; Quebec's AMF caps coverage at $100,000 per category. Every one of those limits counts principal plus accrued interest, so the figure to check is what the GIC grows to, not what went in. A $260,000 non-registered GIC is only fully covered in British Columbia, Alberta, Saskatchewan and Manitoba: it is over the $250,000 caps in Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador, over Quebec's $100,000, and $160,000 over CDIC's $100,000 at a bank. A $150,000 RRSP GIC at a Quebec caisse is likewise $50,000 over the AMF's per-category limit. This calculator's insurance line checks your GIC's own peak balance, account type, institution and province against all of it, and says "unconfirmed" for the three territories, where no primary source was found.
How a GIC ladder actually works
A ladder splits one lump sum into equal portions across several terms — five rungs of 1 through 5 years is the standard version — so that each rung earns its own term's rate and matures on its own schedule. Once the 1-year rung matures, it gets reinvested into a fresh 5-year rung; the next year, the rung that was originally 2 years does the same; and so on, until every rung is a 5-year term and one of them matures every single year from then on. That structure captures most of the extra yield longer terms usually pay while still returning a slice of the money on a predictable annual schedule — a middle ground between locking everything away for five years and leaving it all in a 1-year GIC that has to be renewed, and re-rated, every year.
What this doesn't model
This calculator assumes a GIC held to its full term with no early cashing, so it does not model an early-redemption penalty on a cashable/redeemable GIC, a market-linked GIC whose return depends on an index rather than a fixed rate, a foreign-currency GIC, a promotional or limited-time rate that reverts after an introductory period, or a brokered GIC held through an investment dealer (which can carry different insurance treatment than one held directly with the issuing institution). It assumes a constant marginal tax rate across the whole term for the non-registered after-tax figures, when your real rate could move between now and a GIC's maturity years from now. And it does not model a deposit insurer for credit unions in the Northwest Territories, Nunavut or Yukon, because no primary source confirming one could be found — rather than guess a number, the insurance line marks those three "unconfirmed".
FAQ
What is the difference between a compound GIC and one that pays interest annually?
A compound GIC reinvests its interest into the principal every year (or every six months, or every month, depending on the product) and pays out nothing until the GIC is cashed or matures — each year's interest is calculated on a growing balance, so the dollar amount earned rises every year even at a flat rate. An annual-pay (simple-interest) GIC instead pays that year's interest out in cash every year without adding it to the principal, so the balance never grows and the dollar amount earned is identical every year. Over a multi-year term a compound GIC ends up worth more in total, because part of what it pays is interest on interest that an annual-pay GIC never accumulates.
Why do I owe tax on GIC interest I haven't actually received yet?
The CRA's anniversary-day accrual rule requires you to report interest income each year as it accrues on a compound investment held more than one year, even though a compound GIC pays nothing out until maturity and even if no T5 slip was issued for that year. A payer only has to issue a T5 when it pays a recipient $50 or more in a year, but the recipient must still report every dollar of accrued interest regardless of whether a T5 arrived. This is why a multi-year compound GIC can create a real cash-flow mismatch: you owe tax on interest you can't touch until the GIC matures.
Does it matter whether my GIC is inside a TFSA, an RRSP or a non-registered account?
It changes everything about the tax, not the GIC itself. Interest earned inside a TFSA is entirely tax-free, with no annual reporting at all. Interest earned inside an RRSP or RRIF is tax-deferred: it compounds without being taxed as it accrues, and is only taxed, as ordinary income, when you eventually withdraw it. Interest in a non-registered account has no such shelter — the CRA's anniversary-day accrual rule applies in full, and every year's accrued interest is taxed at your marginal rate that year, whether or not you've received any cash. An FHSA behaves like a TFSA for growth: interest compounds tax-free inside it, with tax questions arising only around contributions and a non-qualifying withdrawal, which this calculator does not model.
What is the difference between a cashable and a non-redeemable GIC?
A cashable (redeemable) GIC lets you withdraw your money early, usually after a short lock-up period of 30 to 90 days, but typically at a reduced or zero interest rate for the time you held it. A non-redeemable GIC locks your funds for the entire term with no early withdrawal in the ordinary course, aside from issuer hardship exceptions, and pays a higher rate in exchange for that lack of flexibility. This calculator assumes a GIC held to its full term either way and does not model an early-redemption penalty.
What does CDIC actually cover, and what does it not cover?
CDIC insures eligible deposits, including GICs of any term, at member banks and federally regulated trust and loan companies, up to $100,000 in principal plus interest per depositor, per institution, separately in each of nine categories: deposits held in one name, joint deposits, and registered plans including RRSP, RRIF, TFSA, RDSP, RESP and FHSA, plus deposits held in trust. Two things it does not cover: provincially regulated credit unions and caisses populaires, which have their own separate provincial deposit insurers with different limits (several offer unlimited coverage), and any GIC held through a mutual fund, stock or other investment product rather than as a straight deposit.
How does a GIC ladder work?
A GIC ladder splits one lump sum into equal portions across several terms — commonly five rungs of 1, 2, 3, 4 and 5 years — each earning that term's own rate and compounding to its own maturity date. Once the 1-year rung matures, you reinvest it into a new 5-year rung, and the following year the (formerly 2-year, now matured) rung does the same, so that after the first five years one rung matures every single year. That gives you the higher rates longer terms usually pay, while still getting a portion of your money back on a schedule instead of locking it all away for five years at once.
This page is general information based on published 2026 CRA, CDIC and provincial deposit-insurer rules, not tax or financial advice. Rates and terms are set by individual institutions and change constantly — check the actual GIC's disclosure documents before buying.