The difference between a CD and a Share Certificate

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

Here's 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 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.

What is the difference between a Share Certificate and a Certificate of Deposit (CD)?

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

How do Share Certificates work?

Certificates 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 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.

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 a certificate is federally insured up to at least $250,000 per individual. Certificates are a great way to maximize your return without risk!

What strategies can you use to maximize certificate earnings?

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

To build a ladder, divide the total amount you want to put into 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. This way you add some liquidity to the total $6,000.

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 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!


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Hanscom Federal Credit Union
Hanscom Federal Credit Union

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