Share Certificates and CDs: Are They the Same?

In uncertain economic times, you want to find ways to invest your money that also give you access when you need it.  If you’ve been looking for a way to earn more from your savings without added risk, you’ve probably come across these two terms: share certificates and certificates of deposit (CDs).

What’s the difference? 

They’re virtually interchangeable. Both a CD and a Share Certificate: 

• Allow you to save money for a set period of time (term)

• Require you to retain money in an account for the full term you choose 

• Offer a fixed rate that’s typically higher than you’d earn on other deposit accounts 

The biggest difference is that CDs (or Certificates of Deposit) are issued by a bank, while Share Certificates are available through your credit union. 

What Is a Share Certificate?

A Share Certificate is a deposit account offered by a credit union as a way to grow your money. A Share Certificate, also often simply called a Certificate, allows you to earn a fixed dividend rate for a specific period of time.

These vocabulary terms might help you get a better understanding of how a Certificate works: : 

• Rate: The amount of money you earn in dividends on your deposits. You may also see it listed as APY or Annual Percentage Yield.  

• Term: The length of time you are required to keep funds in your Certificate account in order to earn interest and avoid penalties. 

• Penalty: A fee that is paid if you withdraw your money from your Certificate early. It is generally a forfeiture of a portion of your earnings. 

When you open a Share Certificate, you agree to leave your money deposited for a set term. Terms can range from a few months to several years. In exchange for keeping your money in the certificate for the agreed-upon term, you typically receive a guaranteed dividend rate for the duration of the certificate.

For example, you might open a 12-month share certificate with a fixed annual percentage yield (APY). As long as you keep your money in the account according to the certificate's terms, you can expect your savings to earn dividends at that stated rate.

A Certificate generally pays a higher rate (APY) in return for your commitment to leave your funds invested for a set time, making it a safer option for steady earning than stocks or other options that are not guaranteed. 

The funds deposited in a Share Certificate are federally insured by the National Credit Union Administration, up to $250,000 per individual depositor. 

What Is a Certificate of Deposit (CD)?

A Certificate of Deposit, commonly known as a CD, is a deposit account offered by banks. Like a share certificate, a CD allows you to deposit money for a predetermined period of time and earn a fixed rate of return.

The way a CD works is identical to a Share Certificate, with the exception of insurance coverage. While Share Certificates are insured by the National Credit Union Administration, CDs are covered by the Federal Deposit Insurance Corporation (also up to $250,000 per individual depositor). 

Share Certificate vs. CD: What's the Difference?

Share Certificates and CDs are basically the same offering just with different vocabulary. 

Both offer a low-risk option to save for the future. Both are protected from loss by being federally insured. Both offer a higher earning option in exchange for keeping money in your account for a set period of time. A CD earns interest, while a Certificate earns dividends. And, credit unions offer Share Certificates while banks offer CDs. However, both are solid options for saving money and watching it grow over time. 

Ready to Open a Certificate? 

If you're a credit union member with savings you don't need to access right away, a Share Certificate could be one option for putting your funds to work earning a predictable return. 

When you are ready to explore your savings options, our Andrews Federal team can help. Reach out to our staff and we can ensure you get the best savings option for your financial situation, needs and goals.