What is a Share Account?

Savings and Checking at Credit Unions

Investor dropping coins in hourglass
Katie Edwards / Getty Images

In the world of banks and credit unions, a share account is an account at a credit union:

  • Share savings accounts pay dividends, similar to interest from a bank savings account.
  • Share checking (or “draft”) accounts are liquid accounts for payments and everyday spending.

Share Savings Accounts

A share savings account is a basic account at a credit union. These accounts pay interest on your savings, providing a safe place for you to store cash.

Opening a share account establishes your membership (or ownership) in the credit union, and makes you eligible to use other products like loans, checking accounts, and more.

If you’re familiar with savings accounts at banks, you already understand the basics of a share savings account. The terminology is different because the account is held at a credit union, but the way you’ll use the account is the same.

Earning interest: Credit unions pay interest on your deposits in a share savings account. Depending on interest rates in general (and how badly the credit union wants to compete for money), the rate you earn might be high or low. But every little bit helps. If you want to earn more, and you’re willing to live with some restrictions, it’s worth asking if the credit union offers certificates of deposit (CDs) or money market accounts that pay more

Access to funds: You can withdraw funds from your share savings account any time you want, but there are restrictions on certain types of withdrawals.

If you use an ATM, visit the credit union in person (including shared branching locations), or have checks mailed to you, you can withdraw as many times as you want. However, a savings account is not for everyday spending. Federal law (Regulation D) limits certain transfers out of a savings account to six per month, including:

  • Checks you write on the account (but not checks payable to you from the credit union)
  • Spending with a debit card
  • Online bill payment and ACH payments
  • Transfers to your checking account

To prevent problems and confusion, most savings accounts don’t offer debit cards. Most people do just fine with six transfers per month – just move sufficient funds over to your checking account and spend from there.

While transfers out of the account are restricted, there is no limit to the number of deposits you make into the account each month.

A safe place: Your share savings (or checking) account is a safe place to keep money. Instead of keeping cash at home or carrying it around, it stays in with the credit union. Check to make sure that your deposits are fully insured and that you’re below the maximum dollar limits.

Collateral: Funds in your share savings account can sometimes be used as collateral for a loan. This strategy will help you build credit (whether it’s for the first time, or you’re rebuilding after some difficulties). Ask about cash secured loans if you want to borrow against your savings.

Share Draft = Checking

A share draft account is a liquid account at a credit union that allows you to frequently make withdrawals and payments.

If you’re familiar with checking accounts, share draft accounts are essentially the same. Again, the only difference is that a “share” account is at a credit union instead of a bank.

Access to funds: With a share draft account, there are generally no limits on how often you use the account (the exception might be a business doing thousands of transactions every month). These accounts are a good place for your everyday spending money. If you write a check, purchase something with a debit card, withdraw cash from an ATM, or pay bills online (whether your biller pulls the funds or you set up the payment with your bank), you’ll use a share draft account or a checking account.

With a savings account, there are limits on how often you can make certain types of withdrawals from your account:  You’re only allowed six “drafts” per month due to Regulation D (although certain transactions, like cash withdrawals from an ATM, are unlimited).

The term "draft" is an old term referring to checks drawn against funds in the bank, but you can think of it as money leaving the bank or credit union.

Earning interest: Most checking accounts do not pay interest. However, some credit unions offer reward checking, which allows you to earn

Other Types of Accounts

There are a few other terms you might want to get familiar with if you use a credit union.

Certificates of deposit (CDs) can also have different names. At credit unions, look for “share certificates” if you want to bump up your earnings.

Retirement accounts often refer to shares as well, but typical acronyms like “IRA” should help you recognize what type of account you have.

Ownership

Credit unions are different from banks because every account holder is an owner of the institution. As an owner, you have a say in how the credit union is run, and you can vote on various issues and the Board of Directors. Generally, it doesn’t matter if you have more or less money than anybody else in your account – every member is treated equally and gets one vote.

Besides the different structure (and language), there’s little difference between most banks and credit unions from a customer’s perspective. They offer more or less the same services, and your funds are just as safe in a federally insured credit union as they are in an FDIC-insured bank account. Deposits are protected up to $250,000 per depositor per institution, and it's possible to have more than $250,000 insured in one credit union. However, not all credit unions are federally insured.

Not Necessarily a Joint Account

Don’t confuse a share account with a shared account (that you share with somebody else). The term "share" refers to your share of ownership in the credit union. Although you can have a joint share savings account, share accounts can also be individual accounts (and other types of accounts).