What is the Difference Between A CD And A Share Certificate?

father giving daughter in shopping carriage a high five at the grocery store

We often get members who'll come into a branch or call our Remote Support team to ask about opening a Certificate of Deposit (CD). Sometimes they're surprised to learn that we don't offer CDs; we offer something called a Share Certificate instead.

We’ll go over what you need to know about Share Certificates and how they're different from CDs. But first...

What is a Share Certificate?

A Share Certificate, sometimes called a Term Share Certificate or Share Term Certificate (STC), is a certificate of deposit issued by a credit union. It represents a deposit that is made for a certain period of time that earns specified dividends over that period.

How do share term certificates work?

Well, they require you to invest funds for a specific period of time, and in return, you earn a higher dividend in the account. The length of a share certificate can vary; as little as 90 days and up to five years are typical term lengths. When your certificate matures, you receive the money you originally invested plus the earned dividends.

What is the difference between a STC and CD?

Term Share Certificates are the credit union equivalent of a bank's Certificate of Deposit. CDs and STCs have minimal differences: the latter is a product offered by credit unions and the former are offered by banks. At a credit union, you earn dividends on your money while at a bank, you earn interest. Otherwise, they work the same way.

Why consider putting money into a Share Certificate today?

The current rise in interest rates offers an opportunity to review your investment strategy. Term Share Certificates can help you achieve your savings goals while allowing you to earn a higher rate than you would with a regular savings account. And unlike money you invest in things like stocks, bonds, and mutual funds, any money you put into an STC is federally insured up to at least $250,000 per individual. Share Certificates are a great way to maximize your return without risk!

What strategies can you use to maximize term share certificate earnings?

One way to make the most of an upward trend is to build a ladder with your STCs.

To build this ladder, follow these steps:

  1. Divide the total amount you want to put into share certificates into even amounts. If you have $6,000, for example, you could put $2,000 into a 12-month certificate, another $2,000 in a 30-month certificate, and the third $2,000 in a five-year certificate.
  2. Once the shortest-term share certificate matures, e.g. the 12-month certificate of $2000 in the previous example, you roll this into a new certificate account.
  3. Repeat the process as the other term share certificates mature, and this way you add some rolling liquidity to that initial $6000 investment.

Liquidity is the ability to convert your investment into cash. Investing all your funds in the highest term can cause you to miss out on a higher-rate environment that might develop over that time. At the other extreme, leaving funds in the shortest-term certificates could exclude you from the higher yields available with longer terms.

You can shorten or lengthen the terms in your ladder, depending on your cash needs and the rate environment. As a rule, keep your ladder shorter in times of change, and lengthen them during prolonged high-rate or low-rate periods.

Are share certificates as secure as savings accounts?

They certainly are! Insurance on your Hanscom FCU account is provided by the National Credit Union Administration (NCUA), our federal regulator. Your accounts are insured up to $250,000 per person by the National Credit Union Share Insurance Fund (NCUSIF). Individual Retirement Accounts (IRA) are insured separately up to $250,000.

The National Credit Union Administration (NCUA), a federal agency, administers the insurance fund and regulates federally insured credit unions. The fund is backed by the full faith and credit of the U.S. Government. Depending on how your accounts are owned and what types of accounts you have, you can increase the total insurance on your funds to greater than $250,000.

Calculate the amount of your insured funds at a federally insured credit union using NCUA’s Share Insurance Estimator. The estimator can be used for personal, business, or government accounts. Personal accounts include individual ownership, joint ownership, payable-on-death (accounts with named beneficiaries), living trusts, and IRAs. The Estimator also includes an extensive Glossary of Terms and Frequently Asked Questions.

You can also read NCUA's More in-depth information on types of deposit accounts.


Learn more here about the rates we offer on our Share Certificates. We're also offering a special rate on our 19- and 48-month Share Certificates!  Drop by a branch or give our Remote Support team a call at 781-656-4328 to open your Share Certificate today!

Learn More About Our  Certificate Specials!

*This article has been updated with new information for 2023

Others are reading:


Make Your Summer Vacation Plans Inflation-Proof
Beware the Amazon Prime Day Scam

About Author

Hanscom Federal Credit Union
Hanscom Federal Credit Union

Related Posts
Three Tips to Build a Financial Safety Net
Three Tips to Build a Financial Safety Net
Traveling this summer? 9 credit card tips to know
Traveling this summer? 9 credit card tips to know
How to Crush Lifestyle Creep
How to Crush Lifestyle Creep


Subscribe To Blog

Subscribe to Email Updates