Share Certificate

An investment instrument that is very much like a certificate of deposit (CD)

What is a Share Certificate?

A share certificate is an investment instrument that is very much like a certificate of deposit (CD).


Share Certificate


There are two primary differences between share certificates and certificates of deposit. The first is that CDs are offered by banks, while share certificates are only offered through credit unions. The second is that CDs pay their investment return in the form of interest, while share certificates pay the purchasers returns in the form of dividends.

However, the dividend return from a share certificate is essentially the same as earning interest on a certificate of deposit. In fact, these two instruments are so similar that many credit unions refer to the share certificates they offer as CDs.

Credit unions frequently offer their members somewhat higher rates of return on depository accounts – such as share certificates – than the rates offered by traditional banks.



  • Share certificates are deposit accounts that function very similar to certificates of deposit at a bank.
  • Share certificates differ from CDs in that they are offered by credit unions rather than by a bank, and they pay returns in the form of dividends rather than interest.
  • Like CDs, share certificates offer a way for depositors to earn higher returns than they can get from a regular savings account.


Structure of Share Certificates

Share certificates are depository accounts, much like savings accounts. The advantage that share certificates offer over a regular savings account is that of paying a higher rate of return.

Members of credit unions may purchase share certificates of varying maturities, ranging from three months up to 70 months (five years). The certificates may be cashed in early, before their stated maturity date, but there is usually a financial penalty charged for doing so.

Deposits in share certificates are insured – up to $250,000 – by the National Credit Union Share Insurance Fund (NCUSIF). Minimum balances for a share certificate deposit typically range anywhere from a bare minimum of $100 up to $2,500.

Usually, there is no maximum deposit limit placed on a share certificate. Some share certificates offer holders the option of depositing additional money into their certificate account during the duration of the certificate’s term.

When a share certificate reaches maturity, the holder has the option of rolling the money in the account over to a new certificate, withdrawing the money, or transferring it to another account they hold at their credit union.


How to Earn Money With Share Certificates

The money earned on a share certificate is commonly quoted in terms of annual percentage yield (APY), just as with a bank certificate of deposit. The dividend rate paid on a share certificate is usually a fixed rate that applies for the entire term of the certificate.

However, some share certificates are offered with an adjustable rate. The adjustable-rate feature will benefit certificate holders if interest rates rise, but act to their detriment if interest rates fall. A fixed-rate return is beneficial when interest rates decline, but investors lose out if interest rates rise during the term of their certificate.

The return earned on a share certificate depends greatly on the frequency of compounding, which determines how frequently dividends are paid. Compounding terms may range anywhere from daily to yearly.

The most beneficial compounding period for investors is daily compounding, as this will provide the highest effective return. Most credit unions that offer daily compounding pay compounding dividends monthly.

Share certificate holders may be able to withdraw dividend payments earned on their certificates without any penalty; however, they will earn maximum returns on their certificates by instead leaving the dividends to be automatically reinvested in the certificate.

Share certificates can be a good savings vehicle option as long as the investor does not anticipate needing the money deposited in the certificate before the certificate’s maturity date. If you anticipate needing more flexible access to your funds, putting money into a money market account may be a better option.

Most credit unions offer a share certificate calculator on their website, so members can see exactly how much they will earn from varying amounts deposited into certificates of varying maturities.


Additional Resources

CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.

To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

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