Share Certificates vs. CDs: The Key Differences | SDFCU (2024)

FAQs

Share Certificates vs. CDs: The Key Differences | SDFCU? ›

Share Certificates are federally insured by the National Credit Union Administration (NCUA) up to $250,000, while CDs at banks are insured by the FDIC. Your money will stay safe for the life of the account.

Share certificates and CDs are both savings accounts and are essentially the same. The main difference is that share certificates are offered by credit unions and CDs are offered by banks. Share certificate yield dividends, whereas CDs earn interest.

Are share certificates worth it? Share certificates can be a good investment; however, you should consider your financial goals and needs. If you want heightened earning power, a share certificate is a great option, but you should know that funds cannot be withdrawn for a set time.

Although share certificates earn a predictable and steady income, they may not earn as much as other investments, like stocks and bonds. The higher earnings potential with these investments comes with increased risk, however.

What Is a Share Certificate? A share certificate is a written document signed on behalf of a corporation that serves as legal proof of ownership of the indicated number of shares. It is also referred to as a stock certificate.

Share Certificates are guaranteed by the National Credit Union Share Insurance Fund (NCUSIF), while CDs at banks are insured by the FDIC. Your money will stay safe for the life of the account.

In keeping with the direction of the modern, paperless world, from January 2023 new share certificates will cease to be issued.

Low risk: You generally can't lose any of your principal investment in a share certificate.

Share certificates serve as proof of ownership and are essential for various purposes, such as transferring ownership, raising capital, and maintaining transparency in corporate governance.

Can you cash out a share certificate? ›

Early Withdrawal of a Share Certificate

If you need to withdraw funds from your certificate prior to maturity‚ you have two choices: Close the certificate and withdraw your money. If any funds must be withdrawn from a certificate‚ the entire certificate balance must be withdrawn and the certificate closed.

The certificate has a minimum balance as an initial deposit, but there is rarely a maximum balance. That means that most of the time, you can put in as much money as you like. This money is safe up to $250,000 with National Credit Union Administration (NCUA) insurance.

CD rates may not be high enough to keep pace with inflation when consumer prices rise. Investing money in the stock market could generate much higher returns than CDs. CDs offer less liquidity than savings accounts, money market accounts, or checking accounts.

The FDIC Covers CDs in the Event of Bank Failure

But the recent regional banking turmoil may have you concerned about your investment in case of a bank failure. CDs are treated by the FDIC like other bank accounts and will be insured up to $250,000 if the bank is a member of the agency.

Are CDs safe if the market crashes? Putting your money in a CD doesn't involve putting your money in the stock market. Instead, it's in a financial institution, like a bank or credit union. So, in the event of a market crash, your CD account will not be impacted or lose value.

The interest you earn on a certificate of deposit (CD) or share certificate is taxable as regular income, unless you've opened a tax-advantaged account like an IRA CD.