October 2, 2023
You want to save money, and you want it to grow. You also don’t want to use it or lose it. Certificates of Deposit — commonly known as CDs — have long been a popular type of savings account, offering savers a bit of interest for investing a sum of money with a bank for a certain period of time. Banks promote them, proudly listing the going rates for their preferred terms. What is less known is that credit unions offer the CD’s nearly identical counterpart, the share certificate. What is even less recognized is that credit union share certificates often offer greater advantages to members than bank CDs afford their customers.
During that time, the money in the CD must remain in the account because the bank is using it to make money. Any withdrawal during the term can incur early withdrawal penalties. That’s why the interest rates for CDs are usually higher than any rates offered for standard savings accounts. In fact, the longer the CD’s term, the higher the interest rates generally are.
At the end of the term, the CD holder regains access to the money invested as well as the agreed-upon interest that accrued during the term. The CD holder can withdraw the funds or allow them to renew under the bank’s latest rates.
What Is a Share Certificate?
Credit unions offer their members share certificates1 instead of CDs. The name might be slightly different, but share certificates work just like CDs. Members deposit money in a certificate, agreeing to let the credit union hold their money for a set period of time in return for a certain percentage of interest to be compounded either monthly or annually. At the end of the term, the certificate holder regains access to their investment plus the accrued interest and can either withdraw the funds or renew the share certificate under the credit union’s current rates.
The attractive factor about certificates is that they’re a type of savings account that lets you lock in a desirable interest rate for the term. Whatever length of time that may be, the interest rate usually is higher for a certificate than it is for standard savings accounts. The advantage is that if market interest rates decline, your certificate will still earn interest at the agreed-upon dividend percentage. Likewise, if market interest rates rise, your certificate will continue to earn interest at the percentage originally stated for the certificate’s term.
Bump rate share certificates1 allow you to benefit from rising interest rates without worrying about what might happen if interest rates fall. When you purchase a bump rate share certificate, you do so with the expectation that the interest rates will continue to rise. If they do, you can choose to increase your interest rate from where it started to the new, higher rate, allowing you to put fertilizer on your growing savings.
Share certificates1 are useful for both short-term and long-term financial planning. If you think that interest rates will start to rise, you can invest in a share certificate with a shorter term of six months or a year, for example. At the end of the term, if rates are indeed rising, you can renew the certificate at the new, higher rate and, if you choose, for a longer term. If rates are falling, they may not have fallen by much within a shorter time frame, and you can renew to withstand any further drops.
Conversely, if you anticipate interest rates dropping, you may want to invest in a long-term share certificate that will continue to earn interest at the established rate throughout the certificate’s term.
Another attractive feature of share certificates is that you don’t have to put all of your money in one certificate. You can set up multiple certificates that mature at different times or set increments—one a year, for example. As each matures, you can reassess your financial picture and either renew or reinvest in another certificate or withdraw that certificate’s money without penalty.
Share certificates are also a really good way to save up for a large expenditure like a car or a deposit on a home simply because once you open the account, the funds are removed from reach. Rather than have $5,000 sitting in a standard savings account that earns little while tempting you to nickel-and-dime it in spending, you can secure your nest egg in a certificate that will help your savings grow. Technically, you’ll still have access if you really need it, but it’s subject to early withdrawal penalties.
Why a Share Certificate Is Better Than a CD
CDs and share certificates are basically identical types of savings accounts that go by different names. Their main difference, however, is what makes the difference to the bank investors versus the credit union members.
- Banks issue CDs to customers so that the bank can use that money to make profits for their investors and shareholders. Investors and shareholders then receive those profits as dividends. The only benefit their customers get is the interest specified in the terms and conditions when they open the CD account.
- Credit unions issue share certificates to their members so that the credit union can use that money to make money that will be reinvested into the credit union for the benefit of all of its members. Members, not shareholders, reap the dividends. Both banks and credit unions use money to make money. However, credit unions view their profits as resources for growth that allow them to offer their members better financial solutions and services: fewer fees, higher interest rates for savings and lower interest rates for loans.
Opening a Share Certificate at La Capitol Federal Credit Union
With savings and certificate yields the highest they’ve been in quite a while, now is a perfect time to focus on investing in growth. Share certificates are a smart, safe way of doing that. Whether you have $500 that you’d like to invest, $5,000, $50,000 or more, the financial experts at La Capitol Federal Credit Union are ready to help you find the best rates and terms for share certificates that will work with your financial plans. Check out our share certificates page on our website. Then, reach out to your nearest La Cap location to open an account.
1 La Capitol Certificate Accounts are term Share Accounts. The APY is fixed at the time you make the initial deposit to open or renew the account, and will not change during the term of the Certificate. The APY given above assume dividends remain in the account until maturity. A withdrawal of dividends will reduce earnings. Dividends earned are posted and compounded monthly unless otherwise paid, except for the 91-Day Account, to which earnings are posted at maturity. You may choose to have your earnings compounded in the Certificate Account, or transferred to your La Cap savings or checking account. Applicable fees and other conditions could reduce the earnings on your account. Substantial penalty for early withdrawal. Effective Date: 10/09/2026