Our credit union is always seeking to help educate our members and provide unique benefits that you won’t find anywhere else! Currently, we are running a promotion around our Share Certificate rates, and this has had us thinking… Does everyone know the benefits of having a Share Certificate? Does everyone know the benefits of a CD? Does anyone know the difference?
You may have heard of one or known someone else who had a CD or share certificate, but if you were wondering what they are, you’re in luck! Today on the blog, we’re going to go over what a CD is, what a share certificate is, why someone would set one up, and what you can do today to set one up.
To better understand a Share Certificate, let’s first look at CDs, and no, not compact discs!
So, what is a CD?
A CD is short for a Certificate of Deposit. A Certificate of Deposit is a safe, interest-bearing savings account. Usually, a CD will pay higher interest than traditional savings in exchange for locking in the money for a fixed term.
Why Would I Set Up a CD?
A CD account is ideal for someone who is looking for a low-risk, fixed-income tool used to avoid penalties. There are a few things to consider when setting up a CD account. For one, there are certainly benefits for the account holder. Higher interest rates mean more return on your savings account than a traditional savings account. The other highlight is that your interest rate is locked in. This means no matter what, you will guarantee a certain return if you hold your CD to maturity, meaning the end of the agreed-upon fixed term.
Essentially, you agree to the length of time that the term lasts until you can withdraw funds, and the credit union or bank agrees to you being locked in at a good interest rate with no fluctuation or risk. This is a great tool for anyone looking to keep money in a safe place for a certain amount of time and aiming to earn some interest in doing so.
Who Are CD Accounts Good for?
If you are someone who does not desire to put your money into a product that risks potential loss, and you do not forecast needing the money earmarked for a CD Account, this could be a great option for you. What you may or may not know is that these qualifications also apply to opening a Share Certificate at a credit union, to get the same benefits, but with potentially higher rates!
What is the difference between a CD and a Share Certificate?
Share certificates and VDs are nearly identical in terms of product. Each requires a minimum deposit to be locked for a fixed term to earn higher interest. The main difference is that a share certificate comes from a credit union, whereas a CD comes from a bank.
Share certificates pay dividends, whereas CDs pay interest. Share certificates are insured by NCUA, whereas CDs are FDIC-insured. Both will typically offer a penalty for early withdrawal, typically sacrificing the earned interest.
Here is a key differentiator… Credit Unions offer slightly higher rates due to their not-for-profit status.
Who Makes a Good Candidate for a Share Certificate?
Here are a few examples of who should consider a share certificate!
- Building an Emergency Fund- Someone hoping to have a lump sum for a rainy day, and wants it to grow securely
- People who are oriented toward a savings goal like a vacation, down payment, wedding, or another big buy
- Conservative investors who want to avoid the risks of the stock market
- Retirement planners who are seeking to build a secure portfolio component
How Do I Set Up a Share Certificate?
Well, you’re already on the right track! If you’ve been considering a CD or share certificate, we’d love to help! From now until the end of April 2026 (4/30), we are offering 4% APY with a 4-month term, and 3.5% APY with a 6-month term! If you’d like to learn more, you can simply stop in our TVFCU branch at 10 Jefferson Sq in Batavia, NY, or you can give us a call at (800) 722-8224!
