A savings or checking account held with a credit union is referred to as a share account. Share savings accounts provide variable dividends, which are analogous to the interest that is accrued on bank accounts. Share checking accounts, also known as draft accounts, are liquid accounts that are intended to be used for making payments and spending money on a day-to-day basis.
The Meaning of Share Accounts, Along with Some Examples
One of the most fundamental types of accounts available at a credit union is known as a share savings account. These accounts provide you with a secure location to keep your cash while also providing you with income in the form of dividends on your savings. It is essential to open a share account in order to become a member of the credit union. Once you become a member, you will have access to a variety of different products, including loans, bank accounts, and more.
A share draft account is a type of liquid account that may be held at a credit union. This type of account gives account holders the ability to make regular withdrawals and payments. Share draft accounts are quite similar to checking accounts in terms of their functionality and features. To reiterate, the sole distinction is that a “share” account can only be held with a credit union as opposed to a bank.
The Operation of Share Accounts
Credit unions are distinct from banks in that each member who has an account with the institution is also a shareholder in the credit union. Because you are an owner of the credit union, you have a say in how it is managed, you may vote on different topics, and you can even help elect the board of directors. It doesn’t make a difference whether you have more or less money than anybody else in your account — every member is treated equally and gets one vote regardless of the amount of money they have in their account.
If you are familiar with savings accounts at banks, you already have a fundamental understanding of the fundamentals of a share savings account. Because you open your account through a credit union, the terminology is different. Nonetheless, the manner in which you use the account is not affected in any way by this change.
Your money is just as protected in a credit union account that is federally insured as it is in a bank account that is guaranteed by the FDIC. The maximum amount that can be lost due to a failed deposit is $250, 000 per depositor and per financial institution. However, you should be sure to ask about this because not all credit unions have access to government insurance.
Avoid getting a shared account and a shared account confused with one another (that you share with somebody else). Your percentage of ownership in the credit union is referred to as your “share” of the company. There is the option of having a combined share savings account, but you can also keep individual share accounts.
Individual Retirement Accounts
Your deposits in a share savings account at a credit union will normally earn dividends depending on your share proportional to the amount of interest earned on those deposits. The rate of interest that you earn might be high or low, depending not just on the prevailing interest rates but also on the degree to which the credit union is motivated to attract new depositors. If you want to make more money and are ready to put up with certain limitations, you can consider inquiring with the credit union about the possibility of opening a money market account or a certificate of deposit (CD) with a higher interest rate.
Debit card access is often not available with share savings accounts. You are able to transfer enough money into your checking account so that you may use it to pay your bills and other day-to-day obligations.
Since COVID-19 went into effect, you have the ability to withdraw or transfer funds at any time, and there is no longer a cap on the number of deposits you may put into the account on a monthly basis.
Accounts for Sharing Drafts
When you have a share draft account, the frequency of your transactions is not typically subject to any restrictions. (An exception might be made for a company that does a large number of transactions each month.) This account is a wonderful place to keep the money for day-to-day expenses like groceries and gas. A share draft account or a checking account is a good solution for those who often pay bills online, make purchases using debit cards, make cash withdrawals from automated teller machines, or write checks.
Your share savings account (or checking account, depending on how you use it) is a secure location for your money. Instead of keeping money at their homes or bringing it around with them, members of the credit union store their cash. Check to see that your deposits are completely protected and that you don’t exceed the maximum limit of $250,000.
The vast majority of checking accounts do not offer interest payments. On the other hand, some credit unions have to check accounts that allow you to earn interest as well as reward checking accounts and interest checking accounts.
If you wish to borrow money against your savings, you should investigate cash-secured loans.
The funds in your share savings account have the potential to serve as collateral for a loan in certain circumstances. Utilizing this technique can assist you in establishing credit, whether you are doing so for the first time or are in the process of doing so after experiencing some challenges.
Additional Varieties of Share Accounts
When beginning to use a credit union, it is important to get familiar with the following extra terms:
- Deposits in the Form of Certificates (CDs)
- If you want to increase your profits, you should look for something called “share certificates.”
- Because of this, you will be required to keep money on deposit for predetermined amounts of time.
Investments for Old Age
The term “shares” can be used interchangeably with “retirement accounts,” but common acronyms like “IRA” should make it easy for you to identify the sort of account you have.
- The depositor’s ownership stake is represented by the share account that is held at a credit union, which is analogous to the savings or checking account that is held at a bank.
- There are many share accounts, but not all of them, that are insured for deposits of up to $250,000.
- Share accounts are a common type of asset that can be used to get a loan.
- Accounts can be set up so that only one person owns them, or many people can own them together.