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Share Certificate vs CD


Share Certificates and CDs (Certificates of Deposit) are two names for very similar longer-term savings accounts. Share Certificates are offered by credit unions like HFS, and CDs are offered by banks. Let’s explore both and discover which is right for you.

What is a Share Certificate?

A Share Certificate is a savings account that lets the depositor earn a higher dividend in exchange for a time-length commitment from the depositor not to make withdrawals. A penalty for early withdrawals may apply. Share Certificates are unique savings instruments provided by credit unions, and are attractive to savers who are working to accumulate stable wealth.

How Does a Share Certificate Work?

Share Certificates typically allow a depositor to earn a higher dividend yield by promising not to withdraw their principal deposited amount for a certain length of time. Sometimes, also referred to as a “Term Share Certificate”, a Share Certificate can be opened for various term lengths (usually ranging from terms as short as 3 months up to 5 years). The longer-term commitment you select for your deposit, the higher your dividend yield will usually be. View Share Certificate rates at HFS FCU.

A Share Certificate is fundamentally a type of savings account offered by credit unions like HFS. The National Credit Union Administration, an agency of the United States Government, federally insures most credit unions (including HFS). As such, Share Certificates fall under the National Credit Union Share Insurance Fund and are protected against loss for depositors. However, while a depositor’s principal is protected against loss, early withdrawals are typically subject to a “surrender” of any dividends that have accrued during the term.

What is a Certificate of Deposit (CD)?

A Certificate of Deposit is a savings account that allows the depositor to earn a higher interest rate in exchange for the depositor’s promise not to withdraw the principal amount for a predetermined length of time (the afore-mentioned ‘term”). A penalty for early withdrawal may apply, however. Like credit union members who open a Share Certificate to build secure longer-term savings, bank customers might consider a CD for the same purpose.

How Does a Certificate of Deposit Work?

A Certificate of Deposit functions in almost the same fashion as a Share Certificate. While the terminology is much different (CDs vs. Share Certificate, interest vs. dividends), both CDs and Share Certificates are a secure, longer-term savings strategy. Like a Share Certificate, a CD is a savings instrument that allows the depositor to earn a higher rate of interest in exchange for a commitment to keep the principal amount on deposit for the life of the selected term. Like a Share Certificate, a CDs effective interest rate increases with the duration of the term.

CDs are provided by banks, most of whom are Federally insured by the Federal Deposit Insurance Corporation (FDIC), also an agency of the United States Government. The same rules of engagement typically apply when withdrawing one’s deposit before the agreed term has matured – any interest earned is surrendered back to the bank because the agreement has been broken.

Advantages and Disadvantages of Share Certificates & CDs:

There are plenty of advantages and disadvantages of Share Certificates and CDs. The important thing is that you understand your own unique needs before committing to a single option. With careful research, you can ensure that your decision is informed and the most advantageous regarding your financial goals. Some of the main advantages and disadvantages of share certificates and CDs include:

Advantages of Share Certificates

Credit union Share Certificates are highly appealing for savers looking to safely maximize their returns. The two biggest advantages of share certificates are:

  • They typically offer higher dividend rates than standard savings accounts, making them an excellent choice for long-term savings goals.
  • Their safety is reinforced by federal insurance from the National Credit Union Administration (NCUA), making them a secure investment option that protects your capital up to the insured limits.

This combination of higher potential earnings and federally backed security makes Share Certificates a favorable option for those seeking to grow their savings with peace of mind.

Disadvantages of Share Certificates

Despite their favorable security and returns, Share Certificates do have a few drawbacks that are important to understand; the two biggest downsides to Share Certificates are:

  • They do not allow immediate access to funds without incurring early withdrawal penalties. This makes them less favorable for individuals who want flexible access to their savings before the agreed-upon term has passed.
  • They are fixed-rate, meaning you must lock in at a specific interest rate. This can be a double-edged sword. If interest rates drop in the future, you will earn more than those who have invested in variable rate options. However, if interest rates rise in the future, you could find yourself earning less and missing out on potential high returns.

The fixed-rate, locked-in nature of Share Certificates can be unappealing to some. It is crucial to grasp your exact financial needs and goals before making any final decisions. When considering a Share Certificate, it’s also a good idea to look into future interest rate movement predictions to understand better where your fixed rate stands.

Advantages of CDs

Similar to Share Certificates, CDs are also a great option for individuals seeking stable and predictable returns. The two main advantages of CDs are:

  • They generally offer higher interest rates than a regular savings account, making them attractive to savers seeking favorable returns. 
  • They come in a variety of term lengths, ranging from a few months to several years, which provides flexibility for different financial planning needs and goals.

This higher interest rate and range of term periods allows investors to strategically plan their savings and cash flow, ensuring that their investment matches their financial objectives.

Disadvantages of CDs

Given their similarity, the disadvantages of CDs are pretty much the same as those of Share Certificates, with the main two being:

  • They come with penalties for early withdrawal. If you opt to access your funds before the maturity date, you may incur significant fees, which could negate some or all of the interest you’ve earned. 
  • They come with an agreed-upon fixed interest rate. This can work in your favor if interest rates happen to decrease during your term, but can also be highly unfavorable if interest rates increase.

These factors make it crucial for investors to carefully consider the timing and terms of their CD investments in relation to market trends and personal liquidity needs.

Share Certificate vs CD – What’s the Difference?

Much like a basic savings account, Share Certificates and CDs are very similar in both form and function. Beyond the clear naming differences, perhaps the most notable distinction is ownership. The reason credit unions refer to depositor interest earned as a “dividend yield” is because their depositor and shareholder are one in the same. 

If you are considering a Share Certificate or a CD, here’s what you should consider:

  • Generally, both Share Certificates and CDs pay a higher rate of interest in exchange for a commitment not to withdraw the principal amount over a defined period of time. 
  • If the principal amount is withdrawn early, both accounts usually require a surrender of interest earned, or some other type of early withdrawal penalty.
  • Share Certificates and CDs are both a safe, secure longer-term savings strategy.
  • Both Share Certificates and CDs fall under Federal insurance provision if the institution is Federally insured – either the National Credit Union Administration (NCUA) or Federal Depository Insurance Corporation (FDIC) respectively. Both NCUA and FDIC provide insurance up to at least $250,000 per depositor.

How to Open a Share Certificate

Opening a credit union Share Certificate is a straightforward process. Here’s a step-by-step guide to help you get started:

  1. Eligibility and Documentation: If you want to open a Share Certificate account, you must first become a member of a credit union that offers this type of account. You can become a member by visiting a branch or going online to open an account with the credit union, such as HFS FCU. Once you’ve completed this process, you’ll check your credit union’s Share Certificate eligibility requirements. These requirements can differ depending on your location, employment, and other factors, so be sure you read carefully. After your eligibility is confirmed, you will need to provide personal documentation to open a Share Certificate account. This will generally include a government-issued ID (like a driver’s license or passport), social security number, and proof of address (like a utility bill or lease agreement).
  2. Selecting Terms and Funding the Account: After setting up your membership and account, the next step is to select the term length of your Share Certificate. Term lengths can vary anywhere from a few months to five years or more, so make sure your choice aligns with your financial goals and the timeframe in which you want to have access to your funds. If you opt for a shorter-term agreement, you’ll likely find more flexibility but lower dividend rates. Longer-term agreements will provide you with higher rates but will lock your money in for much more extended periods. After you’ve selected your term, you’ll be all set up to begin funding your Share Certificate. This can be done through a transfer from an existing account, a direct deposit, or a check. Most credit unions require a minimum deposit amount, which will usually vary across institutions, so be sure to read all about the specific requirements of your agreement before making any final decisions.

Share Certificate Rates

When it comes to Share Certificates, one of the key factors to evaluate is how the interest rates or dividend yields vary with different term lengths. Generally, credit unions tend to offer higher rates on longer-term Share Certificates compared to shorter-term options. Financial institutions value the commitment of your funds for extended periods, rewarding you with a higher yield for the increased duration of your investment. For example, a 1-year Share Certificate might offer a fairly average rate, while a 5-year Share Certificate could provide you with significantly higher returns, reflecting your longer commitment of funds.

External factors also play a crucial role in determining the rates offered on Share Certificates. Economic conditions, such as inflation rates and the overall health of the economy, can influence these rates. Additionally, federal interest rate policies set by entities like the Federal Reserve directly impact the interest rates available to savers. During periods of rising interest rates, new Share Certificates might be offered at higher rates to reflect changes in the economy, whereas, in a low-interest-rate environment, rates might be more subdued.

To explore specific rates and options, you can visit our website for current information and offerings. Our resources offer a wealth of information on current rates and terms, allowing you to make an informed decision based on the latest market conditions.

Frequently Asked Questions (FAQs)

What Happens Upon Maturity?

Upon maturity, you typically have a grace period to withdraw your funds, renew, or transfer your Share Certificate into another account.

Can you Continue to Deposit into the Shared Certificate as time goes on?

No, once a Share Certificate is opened, you cannot add additional funds until it matures or during a specific renewal period.

What Happens If I Need to Withdraw Funds Before the Maturity Date?

Withdrawing funds before the maturity date usually results in an early withdrawal penalty, which can affect the interest earned.

Are Share Certificates a Safe Investment?

Yes, Share Certificates are considered safe investments as they are typically insured by the FDIC or NCUA up to $250,000 per depositor.

Can I Transfer Share Certificates to Another Financial Institution?

Transferring a Share Certificate to another institution may be possible but could incur penalties or fees and requires coordination between the institutions.

Final Thoughts

Both Share Certificates and CDs are great options for individuals looking to secure high returns on their long-term investments safely. Share Certificates are available only at credit unions and CDs are through banks. Choosing the right savings option involves fully understanding your unique financial goals and circumstances.  With proper research, you can find the perfect fit for your needs.  Ready to begin a long-term savings plan? An HFS FCU Share Certificate may be the right solution for you. Visit to learn more.


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