Personal Finance

RE: Annual Compound Vs Annual Pay interest GIC Question

  • Last Updated:
  • Jun 12th, 2018 1:59 pm
[OP]
Sr. Member
Dec 25, 2013
723 posts
514 upvotes
Toronto

RE: Annual Compound Vs Annual Pay interest GIC Question

Hey All

I know the advantage of annual compound or at least I think I do (compound interest - interest on the interest compounded annually) But there is also annual pay as an option for GIC's. At least there is for Oak financial. I can't think of a single good reason for annual pay (look at their TFSA GIC's if you want to see), why anyone could possibly want it over annual compound. Anyone care to enlighten me?

Thanks
1 reply
Deal Addict
Oct 7, 2007
3902 posts
1157 upvotes
Two possible reasons for annual pay:

1. You need the cash flow. For example, you live off the interest. People used to do this when interest rates were 10% and higher.
2. From a mathematical and financial perspective, there may be a benefit to annual pay IF you think rates are going to go up in the future and you can reinvest the interest at those higher rates than what you are currently earning in the GIC.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)