Share Certificate vs. CD: What’s the Difference?
Quick Answer
Share certificates and CDs both let you earn a higher rate of return in exchange for keeping your money untouched in an account for a fixed period. Share certificates are offered by credit unions, while CDs are offered by banks and brokerages.
Share certificates and certificates of deposit (CDs) both let you earn a higher rate of return in exchange for keeping your savings untouched in an account for a fixed period. The difference is that share certificates are offered by credit unions, while CDs are offered by banks and brokerages. There are some other distinctions, including that share certificates call your earnings "dividends" while CDs refer to them as "interest."
Here are the key points to know about share certificates vs. CDs:
| Share Certificate | CD | |
|---|---|---|
| Provider | Credit unions | Traditional banks, online banks and brokerages |
| Earnings | Dividends | Interest |
| Insurer | National Credit Union Administration (NCUA), up to $250,000 | Federal Deposit Insurance Corp. (FDIC), up to $250,000 |
| Membership | Required | Not required |
Read on for more about how the two account types compare.
What Is a Share Certificate?
A share certificate is a type of savings account available at credit unions that locks up your money for a certain time period, called a term, and pays you a higher rate of return than a traditional savings account would. At the end of the term, you can roll your money to another share certificate, transfer it to another account or withdraw it in cash.
Share certificates most commonly come with fixed rates, though variable-rate options are available. Terms can range from three months to more than five years. You generally can't add to the balance during the term, and you'll pay a penalty for withdrawing money before the share certificate's term ends.
What Is a CD?
A CD is a savings vehicle provided by banks and brokerages that pays a higher interest rate to the owner than basic or high-yield savings accounts. CDs come with specified terms, from one month to 10 years, and you'll pay an early withdrawal penalty if you try to access the money you've saved before the end of the term. Like share certificates, they require a minimum deposit, which can range from $500 to more than $2,500.
Share Certificate vs. CD
Share certificates and CDs function the same way, but there are some differences. They are insured by different government agencies, and if your credit union is state-regulated versus federally regulated, it may not be federally insured.
Banks pay you interest on CDs, while credit unions refer to earnings on share certificates as "dividends." These are set by a credit union's board of directors based on factors like market rates, the needs of the credit union's members and the financial health of the institution. Credit unions also refer to the money you place in a share certificate not as deposits, like banks do, but as "shares."
Additionally, since credit unions are member-owned, not-for-profit institutions, they may offer lower opening deposits and special programs for members, such as account options for young savers.
Pros and Cons of Share Certificates
Share certificates are a strong savings option for those who don't need immediate access to their money. Here are the key pros and cons:
Pros
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Higher returns: Not only do share certificates offer higher rates of return than other types of savings accounts within credit unions, but they often have higher rates than CDs at banks. For example, in the first quarter (Q1) of 2025 a five-year share certificate with a $10,000 balance earned an average rate of 2.87% annually at credit unions, compared with 2.10% at banks, according to the NCUA.
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Guaranteed growth: Fixed-rate share certificates are safe investments, since they'll grow at the prescribed rate of return during the term without the risk that your balance or its interest rate will drop. If interest rates rise, however, you'll lose out on the potential for even greater growth.
Cons
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Membership requirements: To make use of a credit union's banking products, you must first join as a member. You can do so in person or online. You can qualify to join the credit union via your employer, industry, background (such as a connection to the military) or where you live. Or you can qualify by donating to a charity or nonprofit the credit union partners with. You'll generally pay a one-time fee of $5 to $25 to join.
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Early withdrawal penalty: The main drawback of a share certificate is that once your money is deposited in the account, you won't be able to withdraw it without penalties. So only set aside money you're sure you won't need before the term ends. Early withdrawal penalties are calculated as a certain number of days' dividends, such as 180 days' dividends if you withdraw early from a share certificate with a term of two years. That means you won't end up with less money than you deposited, but you won't earn as much in dividends as you would have otherwise.
Pros and Cons of CDs
Like share certificates, CDs are a worthwhile account to open under certain circumstances, but they do have limitations. Here are the pros and cons to be aware of:
Pros
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Come in many shapes and sizes: There are many different types of CDs, such as step-up CDs with interest rates that increase over the loan term, and add-on CDs, which have lower interest rates but let you add money to the account. Some credit unions may offer share certificates with these features too. You can tailor your CD strategy to your financial needs while earning more interest than you would using other savings accounts.
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Low-risk investment option: CDs are low-risk investments that are a beneficial addition to your overall investment strategy. Diversifying your portfolio means incorporating higher-risk, higher-return investments like stocks and lower-risk asset classes like bonds, so that you're somewhat protected from fluctuations in the market. Choosing a CD helps you keep a portion of your money safe from stock market swings while allowing it to grow in value in a way you can predict.
Cons
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Low liquidity: Like share certificates, CDs are low in liquidity, meaning you don't have immediate access to the money you've saved if you urgently need to withdraw it. That makes a CD a poor choice for an emergency fund, which is better kept in a high-yield savings account. There are some instances when an early withdrawal from a CD can be a wise move, like when you use the money to pay down debt that carries an interest rate far higher than what you'd earn from the CD.
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Could earn higher returns elsewhere: While CDs have higher interest rates compared to savings accounts, you could earn even more if you choose to invest in the stock market through an index fund or in corporate bonds. Choose an investment strategy that's in line with your risk tolerance and savings goals.
Should You Get a Share Certificate or a CD?
When you're deciding whether to get a share certificate or a CD, the first question to explore is whether this type of savings account is the right choice overall. If so, you can then decide if a credit union or a bank is a better home for your money. Here's how to weigh your options.
When It May Make Sense to Get a Share Certificate
- You're already a credit union member. If you're currently banking with, or have a loan funded by, a credit union, you'll experience less friction when opening a share certificate. You can simply navigate to your credit union's "Accounts" page online and open an account, or talk to a representative in person about your options. You also won't have to pay a membership fee, since you'll already have done so.
- You can't make a high opening deposit. Many credit unions offer share certificates with low minimum deposits, such as $50. The account may have restrictions, such as a limit to the maximum contributions you can make, or the requirement that you open a checking account at the same credit union. But you'll likely need to make a higher deposit when opening a CD at a bank.
- You could earn higher returns with a share certificate. The biggest benefit of a share certificate or CD is the dividend or interest rate. If the highest rate you find is at a credit union and the account's features meet your needs, choose a share certificate rather than a CD.
When It May Make Sense to Get a CD
- You're not interested in joining a credit union. You may decide that it's too much work to find a credit union, pay a membership fee and set up a new account there. If your current bank or lender also offers CDs, it may be easier to set up an additional account at your existing institution.
- You like a specific CD offering. Credit unions may not offer the type of account you want, such as a brokered CD, which come with higher rates but aren't available at banks or credit unions.
- You could earn higher returns with a CD. If the highest return you find is at a bank, that's a compelling reason to choose a CD rather than a share certificate.
Learn more: How to Calculate your CD Returns
Alternatives to Share Certificates and CDs
Share certificates and CDs aren't the only places to park your money that earn a higher rate of return than traditional savings accounts. Alternatives include:
- High-yield savings accounts: These savings accounts offer, as expected, higher interest rates than conventional savings accounts. Often, the highest rates are available from online banks. Unlike CDs, though, their rates can change anytime, most commonly after the Federal Reserve raises or lowers the federal funds rate.
- Bonds: Bonds are another type of low-risk investment that provides a fixed rate of return. When you buy bonds, you're lending money that you'll then be repaid with interest on top. Bonds can be a longer-term investment option, since they have maturities that can extend up to 30 years, potentially much longer than CDs.
- Money market accounts: Combining higher rates with withdrawal flexibility, money market accounts are a middle ground between a CD and a checking account. Their rates are not as high as what you'd find with a CD, but you can withdraw money whenever you want without the penalties (unless the institution limits your withdrawals to a certain number per month).
The Bottom Line
Both share certificates and CDs provide the opportunity for supercharged saving, but they differ in the type of institution that offers them and, sometimes, in their available features. Deciding whether to keep your money secured in a share certificate or CD, where you can't straightforwardly withdraw it if needed, is a larger question. Consider your financial goals, how soon you need the funds and how much you want to save overall when choosing the best account for your savings.
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About the author
Brianna McGurran
Brianna McGurran is a freelance journalist and writing teacher based in Brooklyn, New York. Most recently, she was a staff writer and spokesperson at the personal finance website NerdWallet, where she wrote "Ask Brianna," a financial advice column syndicated by the Associated Press.
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