Have you ever stumbled across the term “Share Certificate” and wondered what it really means? You’re not alone. Like other financial products, Share Certificates can be confusing unless someone breaks it down for you.
A Share Certificate is a savings option, similar to a savings account offered by credit unions. These accounts can earn higher dividends than other savings options when your deposit is not withdrawn for a certain length of time. Think of them as a credit union’s version of a bank’s Certificate of Deposit (CD), but with some unique characteristics.
We’re here to help demystify Share Certificates. Once you understand how they work, these accounts can be a beneficial piece of your savings strategy.
Key takeaways
Before we dive deep, let’s highlight the most important points about Share Certificates:
- Share Certificates are a low-risk savings option offered by credit unions
- They typically offer higher, fixed interest rates than traditional savings accounts
- Your money is locked in for a predetermined period
- They’re federally insured by NCUA1, making them a safe way to grow your savings
How does a Share Certificate work?
A Share Certificate is a smart way to grow your savings at a locked-in rate. When you open a Share Certificate, you’re agreeing to deposit a specific amount of money for a set period, typically ranging from a few months to several years. In return, the credit union promises you an interest rate that’s often higher than what you’d earn in a traditional Savings account.
Share Certificate vs CD – What’s the difference?
Share Certificates and Certificates of Deposit (CDs) are similar. The key distinction between a Share Certificate and a CD lies in the financial institution offering the account.
Share Certificates are issued by credit unions, while CDs are offered by banks.
Both have a fixed rate of return on your investment. Both require you to leave your money in the account for an agreed-upon length of time (and both charge fees for early withdrawal).
When you join a credit union, you’re not just another account number—you’re actually becoming a part owner of the whole organization. Unlike traditional banks, when you join a credit union you own one share in that credit union.
At Mission Fed for example, our membership is based in San Diego County so our Share Certificate options are specifically designed by—and for—San Diegans.
Is interest rate the same as dividend rate?
Not exactly. While banks pay “interest” on deposits, credit unions distribute “dividends” to their members, reflecting this cooperative model of financial engagement. This subtle difference reflects on the broader structure of credit unions – when you earn returns, you’re essentially sharing in the credit union’s profits. Nonetheless, earning a return on your investments is positive whether you call it dividends or interest.
Share account vs Share Certificate
Credit unions use the term “Share Account,” but it’s not the same as a Share Certificate. While a regular Share Account (similar to a bank’s Checking or Savings Account) offers flexibility and lower returns, a Share Certificate trades liquidity for higher earnings. With a Share Certificate, your money is typically locked in, and early withdrawal can result in penalties.
Share Certificate Rates
Share Certificate rates vary based on several factors:
- The length of the certificate’s term
- Current economic conditions
- The specific credit union’s offerings
- The amount you’re willing to deposit
How to open a Share Certificate
Opening a Share Certificate is typically straightforward:
- Research credit unions in your area
- Check their current rates and terms
- Decide how much you want to deposit
- Ensure you meet the minimum deposit requirements
- Gather necessary documentation (ID, proof of address, etc.)
- Visit the credit union or apply online
- Fund your Share Certificate
Pro tip: Some credit unions offer special rates for existing members or allow you to ladder multiple certificates for more flexible investing. Check out Mission Fed’s Share Certificate offers today.
Summary
In short, opening a Share Certificate with a credit union is very similar to opening a Certificate of Deposit with a bank.
Share Certificates are a smart, low-risk way to grow your money. They offer a perfect balance of security and returns, especially for those looking to park money safely while earning returns.
Whether you’re saving for a future goal or simply looking to maximize your savings, a Share Certificate could be an excellent option. Just remember to compare rates, understand the terms, and choose a certificate that aligns with your financial timeline and goals.
Must meet membership and account criteria. Restrictions apply.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. Mission Fed Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article by Mission Fed Credit Union is for the information and convenience of its readers and does not constitute endorsement, control or warranty by Mission Fed Credit Union.
1Federally insured by the NCUA up to the applicable limits. To ensure your funds are fully insured, please refer to Share Insurance Estimator | MyCreditUnion.gov
