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Guide to Share Savings Accounts

What Is a Share Savings Account?
Kim Franke-Folstad
Kim Franke-FolstadUpdated January 27, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
A share savings account at a credit union is the equivalent of a savings account at a traditional or online bank. But the word “share” helps convey a key distinction: Credit unions differ from banks in that every account holder is considered a member and shareholder of the institution. You’ll still earn a return on your savings with a share account, just as you would with a savings account at a bank. And, you can expect your money to have similar protections. But there are some important differences to keep in mind if you’re considering opening a credit union savings account.Read on to learn more about what a share savings account might offer you as you work toward your financial goals.

What Is a Share Savings Account?

A share savings account is a savings account at a credit union, which is a members-only, not-for-profit financial institution. Just like a regular savings account, a share savings account provides a safe place to store your cash and allows you to earn interest on your deposits. Interest earned on accounts is referred to as dividends.Like banks, credit unions make it easy to withdraw your money when you need it. You can make cash withdrawals at an ATM, access your money through online and mobile banking, set up bill pay, and make transfers to accounts at other financial institutions. Just as with bank savings accounts, though, you may be subject to monthly withdrawal limits. While federal rules restricting savings account owners to six withdrawals per month have been suspended, banks and credit unions can still cap the number of withdrawals you’re allowed to make and charge fees if you exceed the max.Recommended: Banks vs Credit Unions Compared

How Do Share Savings Accounts Work?

Credit unions are nonprofit membership organizations in which each member owns a share. A share account represents an individual’s ownership in the credit union. As an owner, you have a voice in credit union management, and you can vote on various issues and help elect the board of directors. Generally, it doesn’t matter whether you have a lot or a little in your account — every member is treated equally and gets one vote.Opening a share account is typically required to establish membership in a credit union, which enables you to use other products, such as checking accounts, credit cards, loans, and more.Recommended: How Much Does the Average American Have in Savings? 

Benefits of Opening a Share Savings Account

Share savings accounts come with numerous benefits. Here’s a look at some of the perks of opening a savings account with a credit union.
  • Higher rates and lower fees Because a credit union can give a portion of its profits back to its members, a share savings account typically offers a higher return than a traditional bank savings account. Credit unions also typically charge lower or fewer fees.
  • A focus on good service Because they’re member-owned, nonprofit institutions, you may find a greater focus on providing personalized service at a credit union than at some for-profit banks. 
  • Range of products Once you become a member of a credit union by opening a share savings account, you will typically have access to many other useful financial products and services, including health savings, individual retirement accounts (IRAs), business accounts, credit cards, and myriad loans — everything from auto loans to home mortgages. You may be able to manage many aspects of your financial life through your credit union. 
  • Deposit Insurance The money you deposit in a share savings account at a federally insured credit union is automatically covered by the National Credit Union Administration (NCUA). That means if the credit union fails, you’ll be covered for up to $250,000 as an individual depositor.
Recommended: What is the Average Interest Rate on a Savings Account? 

Drawbacks of Opening a Share Savings Account

Though credit union share accounts can have many benefits for savers, there are some potential drawbacks. Here are some to consider.
  • Limited access Some credit unions may have a limited number of physical locations centered in a specific geographical area, which might be an issue if you travel frequently and like to have access to a physical branch. However, credit unions typically offer broad access to ATMs or offer fee reimbursements when using another financial institution’s ATM.
  • Membership requirements Some credit unions only serve specific employers, geographic areas, or groups (like schools, churches, or labor unions). You may have to do some research to find a credit union you’ll be able to join.
  • Deposit insurance may not be government-backed Some credit unions aren’t covered by the NCUA’s deposit insurance but are privately insured. This is something to keep in mind as you comparison shop various savings account offers. 
  • Online banks may be more competitive Because their overhead is typically lower than financial institutions that have brick-and-mortar locations, online banks may be able to offer higher rates on their high-yield savings accounts, and also typically have low or no fees.   
Share Savings Account ProsShare Savings Account Cons
Higher APYs and lower fees than traditional bank savings accountsAccess to physical locations may be limited
Known for excellent customer serviceSome credit unions may cater to a narrow membership group
Access to other credit union products and servicesOnline banks may offer more competitive rates
Accounts are typically federally insured Not all credit unions are federally insured

Opening A Share Savings Account

If you’re interested in opening a share savings account, here’s how to get started.  
  1. Find a credit union. There are typically membership requirements to join a credit union. In some cases you may need to be affiliated with a certain profession, military association, school, or religious group. In others, you simply need to live in a certain geographic area. You may need to do a little digging and ask around. You can also use the NCUA’s search tool to find a credit union.
  2. Become a member of the credit union. Once you find the right fit, you’ll need to become an official member. This may require paying a small fee (often $5 to $25) to purchase your share. 
  3. Open an account. In some cases, you need to open a share draft account before you can open your share savings account. To open either type of account, be prepared to provide some personal information and documentation, including your:
    • Driver’s license or other government-issued identification (such as a passport)
    • Social Security number
    • Date of birth
    • Current address (and proof that it’s your address if it differs from your ID)
    • Contact information (phone and email)
    • Checking account information (if you’re using your checking account to fund your savings account or linking the two accounts
    • Designated beneficiary (if it’s an individual account)
  4. Fund the account. If you open the account in person, you can use cash or a check. If you’re applying online, you can transfer funds from another account or you may be able to make a mobile check deposit. 

What is a Share Draft Account?

A share draft account is the credit union version of a checking account (some credit unions will actually call it a checking account). Like bank checking accounts, this type of account is ideal for everyday spending — you can withdraw or transfer money from the account whenever you like. You have access to a debit card, can get cash from an ATM, and can pay bills online. Most share draft accounts do not pay interest. However, some credit unions offer reward and interest draft or checking accounts, which allow you to earn interest.

Other Types of Share Accounts

Once you open your share savings or draft account, you’ll have access to other types of accounts your credit union offers. These may include: 
  • Share certificate of deposit (CD) Also called a “share certificate,” these accounts typically offer a higher return on your savings than a share savings account but require you to leave your money on deposit for a set period of time.
  • Share money market account Like a traditional money market account, this typically comes with checks and a debit card, making it like a hybrid checking-savings account. These accounts also typically pay higher dividends than a regular share savings account. However, they usually require a higher minimum deposit and ongoing balance.
  • Specialty accounts Just like banks, credit unions may offer several specialty accounts, including accounts geared toward children, teens, and students; business accounts; and health savings accounts (HSAs).

Are Share Savings Accounts FDIC Insured?

No, but they are usually similarly insured by the NCUA, which charters and regulates federal credit unions. LIke the coverage offered by the Federal Deposit Insurance Corporation (FDIC) for banks, the NCUA covers up to $250,000 per share owner, per insured credit union, for each account ownership category, should the credit union fail. 

Share Savings Account vs Bank Savings Account 

Credit union share savings accounts and bank savings accounts work in much the same way. But there are a few important differences to be aware of. Here’s a quick look at how they compare.

Nonprofit vs Profit

One of the key differences between banks and credit unions is that banks are for-profit enterprises, usually with more robust branch networks and state-of-the-art technology. Credit unions, on the other hand, are not-for-profit cooperatives owned by their members who benefit from an emphasis on community support and more favorable interest rates. 

“Members” vs. “Customers”

When you open a share savings or draft account at a credit union, you automatically become a member — and members own and run the organization. Even if you have a small account balance, you still can vote on policy and help elect a volunteer board of directors. When you open a savings account at a bank, you’re considered a customer or account holder, not a member or shareholder.

NCUA-insured vs FDIC-insured

Bank savings accounts are insured by the FDIC, whereas share savings accounts. and other credit union deposit accounts, are typically insured by the NCUA. The protections are the same, however.Recommended: What Is a Community Bank?

The Takeaway

A share savings account at a credit union is much like a bank savings account — but there are a few differences. When you open a share account, you become a member in a not-for-profit organization. To serve its community, a credit union provides financial products on the most favorable terms it can afford to offer. As a result, share savings accounts often come with higher interest rates and lower fees than traditional savings accounts.If you’re shopping for an account that can help you grow your money, whether it’s through dividends or interest, it’s important to compare saving account rates, looking specifically at the annual percentage yield (APY). The APY includes the interest rate plus the effects of compounding (when your interest also earns interest) during the year. This allows you to compare savings accounts apples to apples. If you’re not sure where to start your savings account search, Lantern by SoF can help. With our online banking marketplace, it’s fast and easy to compare high-yield savings accounts based on APY, fees, and balance minimums. Lantern can help you compare online savings accounts and find today’s best rate.

Frequently Asked Questions

What risks are involved in owning a share savings account?
What type of account is a share account?
What is the difference between a share account and a checking account?
Photo credit: iStock/Zhanna Danilova

About the Author

Kim Franke-Folstad

Kim Franke-Folstad

Kim Franke-Folstad is an award-winning journalist with 30 years of experience writing and editing for newspapers, magazines and websites. Her work for SoFi covers a range of topics related to personal finance, including budgeting, saving, borrowing, and investing.
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