What Is a Share Certificate? [US Credit Unions]

In this article, we’re going to answer the question β€œWhat is a share certificate?” and discuss banking with credit unions more broadly.

Importantly, we are not talking about stock certificates. As we’ll explain, a share certificate is a savings product available through US credit unions.

With this in mind, this will be relevant for both US residents and non-residents considering opening accounts with credit unions.

Of course, if you are a non-resident banking applicant and want to know if a foreigner can open a bank account in the US, you can click the link here to learn more.

Feel free to jump ahead to the areas most relevant to you by using the table of contents below.

Table of Contents

  1. What Is a Share Certificate?
  2. Frequently Asked Questions
  3. Ready to Open Accounts With Banks in the USA?

What Is a Share Certificate?

A share certificate is a savings product offered by credit unions. These certificates entitle the depositor to a higher interest on their savings in exchange for a longer-term commitment. In most cases, early withdrawals are subjected to penalties.

In short, a share certificate operates the same way that a fixed or CD works with a bank. The only difference between the two is the type of financial institution that offers them.

If you already have an account with a credit union, you will likely have a wide range of options available to you. At most credit unions, depositors can choose from varying time commitments, ranging from one month to five years.

Importantly, at the end of the share certificate, the depositor can either choose to withdraw their funds, including both the principal and earned interest, or roll over the deposit. If they decide to roll over the deposit, they will essentially commit to a new fixed term.

Individuals who are looking for other banking options, such as an online bank account with an instant debit card and no deposit, can choose from some US financial institutions. This highly depends on your client profile and banking needs.

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Frequently Asked Questions

Below are three of the most common questions that we receive from people looking to understand what a share certificate is. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.

Is a Share Certificate Worth It?

To determine if a share certificate is worth it requires an assessment of short-term capital requirements and the interest being offered. In other words, will the money be deposited in a share certificate be required by the deposit before it matures? And, is the interest a sufficient return on the deposit compared to alternative investments that the depositor is considering?

How Do Share Certificates Work?

They work by committing to a long-term deposit with a credit union. In exchange for this long-term commitment, the depositor receives a higher interest rate than they would get elsewhere. At the end of the commitment period, the depositor will receive both the principal (initial deposit) and the interest earned during the period.

Is a CD the Same as a Share Certificate?

A CD is the same as a share certificate. However, there is one important difference between these two deposit products. This difference is the type of financial institution that offers them. While CDs are offered by banks, share certificates are offered by credit unions.

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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