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CDs vs. Share Certificates: What's the Difference?

If you’re shopping around for financial products, you may have come across two similar things with different names: Certificates of Deposit (CDs) and Share Certificates. What are the differences and how can they benefit you? Read on to learn more about those products that can help you save for the future.


What is a certificate of deposit (CD)?

Simply put, a Certificate of Deposit (CD) is a savings account with more withdrawal restrictions but higher interest rates. If you have savings that you won’t need for a little while, a Certificate of Deposit is great for you. In exchange for holding your money for at least three months, you’ll get a better interest rate than you would on a savings or money market account. You can still access the money in your CD if you really need it, but you’ll pay an interest penalty if you withdraw it before your term ends.

Use our Certificate of Deposit Calculator to check how much interest you can earn.

CDs vs. Share Certificates: Similarities

  • Both offer long-term solutions to making the most of your money
  • Both have similar terms
  • Both are considered to be safe bets for your cash

CDs vs. Share Certificates: Differences

CDs and Share Certificates really only have one distinction between them:

  • Share Certificates are a product offered by credit unions
  • CDs are offered by banks

At a credit union, you earn dividends on your money; at a bank, you earn interest. However, to make it less confusing for our members, Seattle Credit Union uses the two terms interchangeably. In practice, many credit unions also call their share certificates CDs.

How does a certificate of deposit (CD) work?

CDs and Share Certificates are designed for the long term. You put money in, and the longer your term, the more dividends/interest you earn when you withdraw. Consumers like them because the rates tend to be higher than other savings accounts.

However, the dividend/interest earned is fixed when you open the account. This is nice if interest rates go down, but if they rise, your earnings won’t be worth as much.

advantage of A Certificate of deposit: Long-term security

Another reason these products are popular as a long-term strategy is having security. Share Certificates are guaranteed by the National Credit Union Share Insurance Fund (NCUSIF), while CDs at banks are insured by the FDIC. Your money will stay safe for the life of the account.

Risk of a Certificate of deposit: Early withdrawal penalties

Because the terms typically range from several months to several years, consumers face pretty strong penalties for early withdrawal. In fact, sometimes the fees are so high that they negate your earnings from the account. Therefore, be sure to only deposit the money that you won't need for the time period. If you need more flexibility, consider opening a money market account instead.


If you have a comfortable savings cushion, want an easy way to earn extra money, and don’t think you will need to withdraw it in the near future, both CD/Share Certificates are smart choices.

Interested in adding to your savings? Learn about Seattle Credit Union's CDs and check out current Certificate of Deposit rates

Open A CD

Article provided by our partners at BALANCE.

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