What Is a Share Certificate?

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Written by Ruth Sarreal
Content Management Specialist
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Edited by Tim Manni
Lead Assigning Editor
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Key takeaways:

  • A "share certificate" is the credit union equivalent of a bank certificate of deposit (CD). 

  • Share certificates have a fixed annual percentage yield (APY) for a fixed period.

  • Share certificates can offer better rates than "share accounts," which correspond with bank savings accounts.

  • A share certificate can be a good option for earning interest on cash you'll want to use in the future.

Share certificates: Credit union version of CDs

A share certificate is a type of savings account with a fixed APY for a fixed period. Credit unions offer share certificates. They're equivalent to certificates of deposit (CDs), which you can get at banks. Think of a share certificate as a credit union CD.

Share certificates vs. share accounts

While share certificates are equivalent to CDs, share accounts at a credit union are similar to savings accounts at a bank. Here are some critical differences between share certificates and share accounts:

  • Higher APYs. Share certificates usually offer a higher APY than share accounts, but a share certificate requires that you keep your money in the account for the entire period you selected.

  • Fixed APYs. For that period, your share certificate will earn a fixed APY. On the other hand, the APY of a share account can change from time to time, so the rate of earnings (called "dividends") you get can change.

  • No access to funds. If you withdraw your money from a share certificate before the end of its fixed term, you may have to pay a penalty fee. With a share account, you can add or withdraw funds when you need.

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Why do credit unions call it a share certificate?

Credit unions use the term "share" because members (that is, depositors) at a credit union are part owners of the institution. Just as stockholders have a share of stock in a company, credit union members have share accounts or share certificates in a credit union. Your earnings from a share certificate are called "dividends," equivalent to "interest" earned from a bank.

In the context of investing, a share certificate is a legal document that proves you own some stock (that is, a share of ownership) of a company. The company issues it to the shareholder; a "share certificate" is synonymous with a "stock certificate" in investing terms.

How do share certificates work?

A share certificate works this way: You choose a term (length of time) to open and deposit money into the account. Sometimes a minimum opening deposit is required.

Once you've deposited funds and the term begins, you cannot add or withdraw any funds until the term has ended (or "matured"). You may have to pay a penalty if you withdraw your money before the certificate term ends.

While your money is kept with the credit union, the credit union will pay you dividends. Dividends may be compounded daily or monthly (learn more about compound earnings).

When your share certificate matures at the end of the term, you can either roll your certificate funds into another share certificate (using the CD ladder strategy), transfer your money to a checking or share account, or withdraw your money.

» MORE: Learn more about how CDs and share certificates work

More credit union topics

Frequently asked questions

Share certificates from federally insured credit unions are safe and can be a good idea for cash you want to grow but won’t need in the near future. Credit unions can get federal insurance through the National Credit Union Share Insurance Fund (NCUSIF), which is administered by the National Credit Union Administration (NCUA). This federal insurance protects up to $250,000 per person, per credit union, per account ownership category (joint accounts and single owner accounts, for example).

Certificates of deposit (CDs) can be found at banks, while share certificates can be found at credit unions. Both are a type of savings account that offers a fixed rate of earnings (called “interest” at a bank and “dividends” at a credit union) for a fixed amount of time.

A share certificate is a type of savings account offered by a credit union that earns a fixed rate of dividends (a credit union’s version of interest) for a fixed period of time.

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