What Is A Share Savings Account?

Article Summary:

A share savings account, or a share account, is a savings account created by a credit union. These accounts will offer interest that is variable in nature. The term “share” can also refer to a checking account at a credit union, as well.

Every single day, new financial products and accounts seem to appear out of thin air. One of the less common terms that you might hear while you establish yourself is a “share savings account.” Believe it or not, this is actually a fairly common term that both banks and credit unions use.

Did you want to know what is a share account, and how it can help you? Our guide will give you the full details on what this type of savings account is and does.

What is a share savings account?

Simply put, a share account is a savings or checking account that was created at a credit union, such as PenFed. You can have a share savings account or a share checking account. For most intents and purposes, a share account acts exactly like a savings account from a commercial bank. Share savings accounts are for savings, while share draft accounts are for checking.

Just like regular bank accounts, you get a routing number, a checkbook, an account number, and interest on the money kept there. In most credit unions, you can expect your money to be federally insured for up to $250,000.

The interest rates you get from your share savings account will vary depending on what your union offers. Some unions call their savings interests “dividends” due to the nature of the credit union’s structure.

On average, credit unions offer higher interest rates on CDs, money market accounts, and savings accounts than banks.

Here is SuperMoney’s list of the best savings accounts.

Is a regular share a savings account?

You might have also heard the term “regular share” used by your credit union. This is a savings account that is treated like a standard savings account as well as the cornerstone of your membership in the union. Your savings in this account can earn interest (or dividends) on an annual or quarterly basis.

Why is it called a “share account?”

If you’re curious about the verbiage, you’re not alone. The reason for the change in terminology deals with the nuances associated with credit unions. These are not private, corporate banks. Rather, they are unions that are meant to be owned by the people who use them.

Credit unions call their accounts “share accounts” because they are the requirement of joining a credit union. Your share account literally acts as your ownership share in the credit union. Share accounts allow you to access other member perks, like money market accounts or certificates of deposit.

Both savings and checking (“draft”) accounts can act as your ownership share in a credit union. Your union may require you to open a savings account, a draft account, or both.

What are the 3 types of savings accounts?

So, one thing that you might notice about your credit union is that you don’t have just one type of savings account available to you. There are several different kinds of savings accounts, each with its own requirements. The three most common are:

  • Savings Accounts. These are known as share savings accounts. They’re the most flexible type of savings account you can have. You can add and withdraw as you see fit with these. They are a good choice for people who need an emergency account.
  • Certificates of Deposit. Also known as CDs, these require a minimum deposit amount. With CDs, you will have to deposit a certain amount of money, and then let it vest. Once it vests, you get your money back along with interest. If you remove money from a CD too early, you can incur a penalty that wipes out your interest. These accounts have the highest interest rate.
  • Money Market Accounts. These accounts act like a mix between savings and CDs. You are limited to a handful of withdrawals per month, but they offer a higher interest rate. Money market accounts occasionally come with a debit card and checkbook. However, that’s not always the case.

Do share savings accounts come with a debit card?

This depends on the credit union in question, but generally, the answer is no. Only a handful of credit unions do. Debit cards are usually linked to draft accounts alone. In most cases, account owners will have to move their money into their draft account to access it via a debit card.

Can you take money out of your shares in the credit union?

For the most part, you should be able to take money out of your share savings account in most cases. The money in there is still yours. You are just letting the credit union hold onto it for you. If you want to remove all the funds and keep your accounts open, you may need to give your bank a note explaining the situation.

Like with all things finance, it’s important to know your credit union’s policies when it comes to large money withdrawals. While we can offer guidance on typical credit union behavior, the truth is that every union is different. The best thing you can do is to ask about your credit union’s rules regarding money withdrawals.

Key takeaways

  • A share savings account is a credit union’s version of a savings account.
  • Your share account collects interest and can be withdrawn from at any time you like.
  • Most share savings accounts do not have debit cards. Draft share accounts, on the other hand, do.

Sources:

  • What is a credit union share draft account? – CFPB
  • Share Savings Accounts – PenFed
  • What Is A Share Account? – 1stMidAmerica