Share Account

Detailed Explanation

Share accounts are unique to credit unions, which are member-owned financial cooperatives. Unlike traditional banks where customers are just that—customers—in credit unions, depositors are members and owners. Each deposit into a share account increases the member’s ownership in the credit union. 

These accounts function similarly to savings accounts in banks but are called “share accounts” to reflect the ownership aspect. The funds in a share account earn dividends, which are akin to interest payments in bank savings accounts, based on the income and financial performance of the credit union.

These accounts are subject to terms set by the credit union, such as minimum balance requirements and withdrawal limits, but typically offer higher interest rates compared to standard bank savings accounts. The National Credit Union Administration (NCUA), a U.S. government agency, insures these accounts up to $250,000, similar to how the Federal Deposit Insurance Corporation (FDIC) insures bank accounts.

Example

Sarah is a member of her local credit union, where she opens a share account with an initial deposit of $500. This deposit not only allows her to save but also grants her voting rights in the credit union’s decisions, like electing the board of directors, because she is now a part-owner.

Key Articles Related To Share Accounts

• Are Credit Unions As Good As Banks?
• What Information Do Banks And Credit Unions Share About You?  

Related Terms

Credit Union: A nonprofit financial cooperative owned by its members, offering banking services.

Dividend: A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits or reserves.

NCUA (National Credit Union Administration): The U.S. federal agency that insures deposits in federal and most state-chartered credit unions.

Savings Account: A deposit account held at a bank or other financial institution that provides principal security and interest.

FAQs

How do share accounts differ from regular savings accounts?

Share accounts in credit unions represent ownership shares in the institution, offering members dividends and voting rights, whereas regular savings accounts are purely deposit accounts with interest benefits and no ownership or voting rights.

Can I access the money in my share account at any time?

While you can access your money, some credit unions may have rules on minimum balance requirements or withdrawal limits to maintain membership benefits.

What happens to my share account if I leave the credit union?

If you close your share account and withdraw all funds, you effectively end your membership in the credit union and forfeit any rights or benefits associated with membership.