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Key Takeaways:
- A share savings account is an credit union’s version of a savings account.
- The “share” represents an accountholder’s partial ownership interest of the credit union.
- Interest is paid out of credit union profits.
Credit unions can be a good place to keep some of your money if you’re hoping to avoid high fees that can be associated with traditional banks. Opening a share account or share savings account is often a prerequisite to becoming a credit union member. What is a share savings account? In simple terms, it’s the credit union equivalent of a savings account.
A financial advisor can help you create a financial plan to reach your savings goals.
What Is a Share Account at a Credit Union?
A share account is the basic account you open when you become a member of a credit union. It represents your ownership in the credit union and is similar to a savings account at a bank. In some cases, credit unions may also refer to checking accounts as “share draft accounts,” but both share savings and share draft accounts function like their traditional bank counterparts.
What Are the General Requirements?
To open a share account, you must first qualify for membership at a credit union. Eligibility is usually based on where you live, work, go to school, worship, or a group you’re affiliated with—such as a profession, employer, or military service. Once eligible, most credit unions require you to open a share account with a small deposit, often as low as $5.
What Are the Benefits?
Share accounts often come with lower fees and better dividend rates than bank savings accounts. Since credit unions are nonprofit and member-owned, they return earnings to members through dividends rather than paying interest. Members also have voting rights in credit union elections, giving them a voice in how the institution operates.
How Can You Access Your Funds?
You can access funds in a share account through in-branch banking, online and mobile apps, or ATM networks. Some credit unions also participate in shared branch banking, allowing members to use other credit unions’ branches nationwide. While share savings accounts are mainly for saving rather than spending, you may be able to link them to a checking account or request limited ATM access.
What Are the Fees?
Fees on share accounts are typically low, but they vary by credit union. Some accounts may charge monthly maintenance fees, especially if the balance falls below a set minimum. Others may charge fees for excessive withdrawals or certain types of transactions, but many credit unions reduce or waive fees for active members.
What Is a Share Savings Account?
A share savings account is a type of savings account offered by credit unions. It represents your ownership in the credit union and allows you to deposit money while earning dividends. These dividends are based on the credit union’s profits and are shared with members as a return on their savings. The account functions similarly to a bank savings account, but instead of interest, you earn a portion of the credit union’s earnings.
What Are the General Requirements?
To open a share savings account, you must first qualify for membership in a credit union. This usually depends on factors like your job, location, school, or membership in certain groups. Once you’re eligible, most credit unions require a small opening deposit—often as little as $5—to fund the account and establish your membership.
What Are the Benefits?
Share savings accounts often provide competitive dividend rates that may exceed the annual percentage yields (APYs) offered by traditional banks. In addition to potential earnings, these accounts usually have fewer and lower fees. Credit unions also focus on serving their members rather than generating profit, which may result in more favorable terms and better customer service.
How Can You Access Your Funds?
You can access money in a share savings account through online and mobile banking, phone services, or in-person at a credit union branch. Many credit unions offer shared branching, allowing you to perform transactions at partner locations nationwide. While these accounts are not meant for daily spending, some credit unions do offer ATM access or allow the account to be linked to a checking account for easy transfers.
What Are the Fees?
Fees vary by credit union but are generally lower than those at traditional banks. Some credit unions may charge for excessive withdrawals, inactivity, or falling below a minimum balance. However, many waive fees if basic activity and balance requirements are met.
Are Share Savings Accounts FDIC Insured?
You may be familiar with FDIC insurance if you’ve ever had a bank account. FDIC protection insures deposit accounts at member banks up to $250,000 per depositor, per account ownership type, per financial institution.
So, does the FDIC insure share savings accounts at credit unions? No, the Federal Deposit Insurance Corporation does not cover those accounts. Instead, share savings accounts and other credit union deposit accounts are insured by the National Credit Union Administration (NCUA).
The NCUA’s Share Insurance Fund insures individual accounts up to $250,000. A credit union member’s interest in all joint accounts combined is insured up to $250,000 as well.
Share Savings Account vs. Bank Savings Account
Share savings accounts and savings accounts offered at banks aren’t that different. You can use either one to hold money that you’d like to save. For instance, you might use a share savings account for your emergency fund or to set aside money for a vacation.
There are, however, a few differences between share savings and bank savings accounts. Here’s how to tell them apart:
| Share Savings Accounts | Bank Savings Accounts |
| Share savings accounts represent your ownership or membership in a credit union | Opening a savings account at a bank does not make you a part owner in the bank |
| Share savings accounts earn dividends, which represent a percentage of the credit union’s profits | Bank savings accounts earn interest, not dividends, with the highest rates typically offered by online banks |
| Savers may be able to open a share savings account with as little as $5 | Minimum deposits for savings accounts at banks can vary, with some banks requiring $0 to open an account and others requiring $100 or more |
| The NCUA insures share savings accounts at member credit unions | The FDIC insures savings accounts at member banks |
| Shared branch banking allows credit union members to access their accounts at other credit unions without paying added fees | Banks may charge fees for accessing your accounts at branches or ATMs belonging to other banks |
How to Open a Share Savings Account
If you’re interested in opening a share savings account, the first step is finding a credit union to join. As mentioned, there are membership requirements to join a credit union. Your ability to become a member may be based on:
- Where you live, work, go to school or worship
- Military association
- Professional affiliation
For example, some credit unions cater to military members and their families while others are designed for state employees. On the other hand, some credit unions allow you to join simply based on where you live.
Once you find a credit union to join, you may be able to open an account online or at a branch. Whether you need to open a share savings account or a share draft (checking) account will depend on the credit union.
Opening your account at a credit union isn’t that different from opening an account at a bank with regard to the information you’ll need to provide. For instance, you’ll need to give your name, date of birth, Social Security number, address and phone number. You’ll also need to show proof of identification and make your initial opening deposit.
Once your share savings account is open you can open other accounts, such as a share draft account or a share certificate account. A share certificate account at a credit union is similar to certificate of deposit (CD) accounts that you can find at banks. They are time deposit accounts that allow you to earn interest on your money over a set maturity term.
Bottom Line
A share savings account could be just what you need if you’re looking for an alternative to traditional bank savings accounts. When comparing share savings accounts, consider the dividend rate you can earn and what you might pay in fees to have the account. And remember to look at any other benefits a credit union might offer, such as interest rate discounts on loans, when deciding which one you’d like to join.
Checking Account Tips
- Consider talking to your financial advisor about the merits of share savings accounts and whether opening one is something you might want to do. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If your goal in opening a savings account is to get the highest rate, then you might want to look at what online banks have to offer. While you might not get branch banking access, online savings accounts can carry rates that are significantly higher than what you might find with credit union or traditional bank savings accounts. As an added bonus, the best online banks pay the highest rates while also charging the fewest fees
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