1 yr = 5.45%, 2 yr = 5.55%, 3 yr = 5.10% (via RBC Online Banking) | Page 2 | RBC Royal Bank | Discussion forum

Norman, I wanted to ask you another question about the RBC prime-linked cashable 1 year GIC.

I see that for deposits of $5k-$250k, the current interest rate for both annual and semi-annual interest payouts is 4.75%.

So, my question is: what is the advantage of getting interest paid annually?

In other words, why wouldn't everyone choose semi-annually, since the rates are the same?

What am I missing?

Norman1 said
When paid more frequently than annually, the interest is taxable when paid.

When the RBC prime-linked one-year GIC is purchased early in the taxation year, there is a one-year deferral of the income taxes on half of the total interest with annual interest payout instead of semi-annual interest payout.  

Excellent, thank you Norman -- I did not grasp that at all. Since the interest isn't compounded monthly, I only saw the 'option' to park interest with RBC for an extra 6 months vs. use it (even to just stick it into a HISA) and I couldn't understand why anyone would want to do that.

Much appreciated!