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Share Certificate vs. Certificate of Deposit


The choices can seem endless when you’re trying to decide how to save and grow money quickly and efficiently. Many people don’t know that a share certificate is a great way to grow money in a set amount of time. Certificates offer you stability and peace of mind knowing that your money is secure while it’s growing.

People often mistake certificates of deposit for share certificates. Although there are similarities between the two, there are some key differences that you should be aware of when choosing a certificate. 

The main difference between the two comes down to who offers them. A share certificate is offered exclusively through not-for-profit member-owned credit unions and is insured by the National Credit Union Administration (NCUA). A share certificate allows you to set a term for how long your money will stay and earn dividends (as long as you don’t withdraw any funds before the end of that term).

A certificate of deposit (CD) allows you to earn interest, and is offered by traditional banks and insured by the Federal Deposit Insurance Corporation (FDIC). Like with a share certificate, you leave an amount of money in your account for a set period of time to allow interest to build.  

At Arkansas Federal Credit Union, we know there is no one size fits all approach to money saving. That’s why we offer share certificates with a locked-in rate and maximum security, so you can have peace of mind knowing your money is safe while it grows  over time. 

How Do Share Certificates and Certificates of Deposit Work?

If you’ve never heard of share certificates or certificates of deposit before, you might be wondering how they work and how they differ from a typical savings account. Share certificates and CDs share some factors that differentiate them from standard savings accounts and differ from each other in a few aspects. 

Share Certificates

Opening a share certificate is similar to opening a traditional savings account. For a share certificate, you deposit an amount of money that will get locked in for a selected term. That allows you to earn dividends  simply by leaving your money untouched until your term is up. Arkansas Federal lets you customize the terms of the certificate for as little as three months or as long as 7+ years. 

Share certificate rates are locked in when you open the account, so your rates will not be affected by the changes in the market. This type of certificate is great for steady and predictable growth. At Arkansas Federal, you can open a share certificate account with a deposit as low as $1,000. Opening a share certificate account is as easy as selecting a deposit amount and setting how long your term will be, then sitting back to watch your money grow over time.

Certificate Of Deposit

Certificates of deposit are slightly different from share certificates. The FDIC insures these types of certificates. Like a share certificate, you will deposit a set amount of money for a fixed period. When selecting where to open your account, the possibilities are endless for both types of certificates, and you should be sure to learn about what penalties there may be for early withdrawals. 

Share Certificates vs. Certificates of Deposit 

There are quite a few similarities between a share certificate and a certificate of deposit. Share certificates and certificates of deposit are considered safe long-term investments. They both tend to have similar term lengths, ranging from months to years. 

Both share certificates and certificates of deposit typically have high penalties for early withdrawals. These penalties are applied if you pull money out of the account before the end of the term. It’s essential to be aware of these penalties because if you need to take money out of the account before the end of the period, you could potentially negate anything you might earn.

Share certificates and certificates of deposit differ in how they are owned and insured. Share certificates are offered by not-for-profit profit member-owned credit unions and insured through the NCUA. 

Certificates of deposit are typically purchased directly from banks and insured by the FDIC. 

Setting Up a Share Certificate

Before opening a share certificate or a certificate of deposit, you must know the length of term you are considering and any potential early withdrawal penalties. The early withdrawal penalties could be high, so it’s important to be sure you won’t need to access the money you put in the account during that time.. 

Arkansas Federal offers share certificates with various term length options, and each option has varying annual percentage yields (APY). The APY share certificate rates are tiered based on the length of the term and the amount of money within the account.

Arkansas Federal also offers Rate Boost Certificates. Rate Boost Certificates are 24-month certificates with a locked-in APY, but you have the option to change your rate one time if rates go up. And you must alert Arkansas Federal that you’d like to increase your rate this one time during the initial 24-month term. If you choose to increase our rate, the new rate and APY will be in effect for the remainder of the term. This certificate is similar to a traditional share certificate, but there are differences. With a Rate Boost Certificate you are limited to a 24-month term,, whereas with share certificates, there is flexibility with the length of the term.
These are only a few great options that Arkansas Federal offers its members. If you are interested in opening a share certificate, you can visit our website or one of our branches to learn more about share certificates and available options. Arkansas Federal offers stress-free savings solutions unique to your specific financial needs.

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