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What Is a Credit Union Share Certificate?
Money SmartsMarch 15, 2024
When it comes to saving your money, credit union share certificates offer many benefits. But what is a share certificate, and how does it compare to a certificate of deposit (CD)?
Read on to learn more.
What Is a Credit Union Share Certificate?
A share certificate is a type of deposit account provided by credit unions. Credit unions use the word “share” to reflect a member’s ownership in the credit union. Share certificates often have a higher interest rate than a regular savings account.
When you open a share certificate, you agree to leave your funds in the account for a fixed period. For example, you can open share certificates for 13-month and 18-month terms, in addition to other options. However, if you withdraw your funds before the certificate term ends, you may be penalized.
What Is the Difference Between a Share Certificate and a CD?
While share certificates and CDs are both fixed-term deposit accounts with higher interest rates, there are a few differences between the two. Most of the difference is in the terminology used. Because credit unions are member-owned, not-for-profit financial institutions, they offer “shares” to their members and pay them dividends. Banks, which are for-profit financial institutions, offer CDs instead of share certificates. Banks pay CD holders interest instead of dividends.
Another difference between share certificates and CDs is who insures them. For most credit unions, deposits up to $250,000 are insured by the National Credit Union Administration (NCUA). At banks, deposits up to $250,000 are insured by the Federal Deposit Insurance Corporation (FDIC). Both the NCUA and the FDIC are backed by the full faith and credit of the US government.
Benefits of a Credit Union Share Certificate
If you’re weighing your options across different savings accounts, credit union share certificates offer several unique benefits. Because credit union share certificates often offer higher interest rates than savings accounts, you can take advantage of high dividends without the risks of the stock market. Many credit unions offer share certificates at different term lengths, so you can choose one that fits your savings goals. Once your certificate matures, you have the option to reinvest your funds into another certificate so you can continue earning dividends.
Credit Union Share Certificates: Key Things to Know
A share certificate is a type of savings account offered by credit unions. Share certificates are a fixed-term deposit account that often offer higher rates than a regular savings account. Credit union share certificates pay dividends to their account holders, while CDs pay interest. Credit unions offer share certificates at a variety of term lengths, allowing you to select one that aligns with your savings goals.
As a not-for-profit credit union, GLCU promotes the financial well-being of our members. In addition to our educational resources and outreach efforts, we also give back to our members in the form of reduced or eliminated fees, higher savings rates, and lower interest rates on loans. Check out our rates and consider opening a share certificate today.
The information in this post is for educational and informational purposes only and does not constitute investment advice. You should consult a licensed financial advisor before investing in any financial product or service.