If you're fortunate enough to have some extra savings and want to earn higher dividends than a regular savings, checking or money market account, consider a share certificate. A share certificate account is similar to a certificate of deposit (CD), but it is issued by a credit union, rather than a bank. You cannot withdraw your funds during the pre-selected length of the term without penalty, but you will most likely earn a higher rate than any of the above-mentioned options. Here are a few more reasons why you may want to invest in a share certificate:
Guaranteed or fixed rate of return
There are no unknowns when you invest in a Share Certificate. You pick the deposit amount, the term and the rate. As long as you don't withdraw the funds, you'll be able to calculate your dividends upon maturity at the onset of your investment. As they say—it's a sure thing.
Short- and long-term investing
With terms between 30 days and five years, you have a wide range of investment options. If you think rates will rise, invest in a shorter term. If you think rates will decline or remain the same, invest in a long-term share certificate. Keep in mind, the longer the term, the higher the rate. Likewise, the shorter the term, the fewer dividends you earn.
Low initial opening deposit
You can open a share certificate with as little as $1,000, while a money market account often requires a larger deposit and doesn't earn as high a rate. For higher deposit amounts, jumbo accounts are available and they generally earn a higher rate.
Many credit unions offer a one-time withdrawal or one-time/unlimited add-ons option. If you're concerned about fluctuating rates, finding a share certificate with these features can improve your savings potential and provide greater flexibility.
Share certificates are federally insured by the National Credit Union Administration (NCUA), a US government agency. Each account is federally insured up to $250,000, so you know your funds are safe and sound.