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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. Most credit unions (including HFS) are Federally insured by the National Credit Union Administration, an agency of the United States Government. 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 entirely 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 Also like a Share Certificate, a CD’s 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.

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. 

Ready to begin a long-term savings plan? An HFS FCU Share Certificate may be the right solution for you.