Share Certificate vs. Certificate of Deposit (CD): What’s the difference?

Updated March 22, 2024  |   Published September 18, 2023

Share Certificates and Certificates of Deposit (CD) are similar products offered by financial institutions. They are used for long-term savings strategies and earn higher returns than your typical savings account. They can come in term lengths as short as 3 months and as long as 5 years. So what makes the two products different from each other? There are a few things.


What is a Share Certificate?

A Share Certificate is offered by credit unions. In particular, credit unions that are federally chartered – like Webster First. This means we are insured and regulated by the National Credit Union Administration (NCUA), a U.S. Government Agency.

As a member of a not-for-profit, federally chartered credit union, you become part owner of that institution. When you put money in an account, that becomes a “share.” All deposit accounts are considered shares and you are considered a shareholder.

With Share Certificates, you choose a term during which your money will stay secured at the credit union while it earns dividends. The higher yield you earn in these accounts is what you get for promising to leave the funds untouched for that term.

If you withdraw the money before your term’s maturity date, you will be subject to withdrawal penalties that equal a certain amount of your dividends. See our Share Certificates page for term lengths, rates, and more information about withdrawal penalties.


What is a Certificate of Deposit (CD)?

Certificates of Deposit are typically offered by banks, although you may see some state-chartered credit unions that offer this product as well. CDs function almost the same as Share Certificates. The main difference, other than the name, is that CDs pay out interest not dividends.

Federal banks are regulated and insured by the Federal Deposit Insurance Corporation (FDIC), rather than NCUA. At a bank, you are considered a customer, rather than a member or shareholder.

Much like the Share Certificate, you will earn higher rates on your funds in a CD for promising to leave that money secured in the bank for your selected term. You will also be subject to penalties for early withdrawal from a CD.


What are Share Certificates and CDs used for?

Each of these products can be used as a long-term savings or investment strategy. Investing your money in these products will yield what is likely the highest return of any deposit account and poses no risk of loss like investing in the stock market would (unless you withdraw early).

If you are putting away money for a specific purpose, like your retirement or a child’s college fund, a share certificate would be a good option to grow that money while it sits dormant in the account. Your initial deposit can be as little as $500.00.

While many banks may only insure their CDs up to the FDIC limit of $250,000, Webster First insures all deposits exceeding the $250,000 NCUA limit with MSIC insurance (Massachusetts Credit Union Share Insurance Corporation).

Would you like to become a shareholder at Webster First and grow your money?

Open a Share Certificate Today