What Is a Share Savings Account?

SmartAsset: What Is a Share Savings Account?

Key Takeaways:

A share savings account is an credit union’s version of a savings account.
The “share” represents an accountholder’s partial ownership interest of the credit union.
Interest is paid out of credit union profits.

Credit unions can be a good place to keep some of your money if you’re hoping to avoid high fees that can be associated with traditional banks. Opening a share account or share savings account is often a prerequisite to becoming a credit union member. What is a share savings account? In simple terms, it’s the credit union equivalent of a savings account.

A financial advisor can help you create a financial plan to reach your savings goals.

What Is a Share Account at a Credit Union?

Credit unions are membership organizations in which each member owns a share. A share account represents an individual’s ownership in the credit union.

Share accounts can be savings accounts or checking accounts. You may also hear credit union checking accounts referred to as share draft accounts. In terms of their basic function and the purpose they serve, share savings accounts and share checking accounts are really no different than savings accounts or checking accounts offered at brick-and-mortar banks or online banks.

Opening a share account is typically a requirement to join a credit union. Whether you’re expected to open a share savings account or a share checking account depends on the credit union you’re joining. The opening deposit for either type of account is usually quite low, often as little as $5.

A share savings account is a credit union version of a savings account. Share savings accounts allow you to deposit money and earn dividends on your balance. These dividends are a portion of the credit union’s profits that are paid out to its members.

Share savings account rates can vary by the credit union, though they can be higher than the annual percentage yield (APY) traditional banks offer to savers. Fees, meanwhile, may be lower than what you might pay at a regular bank.

Similar to a savings account at a bank, you may be able to link your share savings account to a checking account for convenient transfers. It’s not common to receive a debit card or ATM card with a share savings account, as they’re intended to hold money that you don’t necessarily plan to spend. Some credit unions do, however, offer ATM access as an option.

Credit unions allow you to withdraw money from a share savings account at any time. Again, that might include cash withdrawals via ATM card. You can also typically access your money through online and mobile banking, phone banking or at a local credit union branch. If your credit union participates in shared branch banking, you can also manage your accounts at branches of partner credit unions.

Are Share Savings Accounts FDIC Insured?

You may be familiar with FDIC insurance if you’ve ever had a bank account. FDIC protection insures deposit accounts at member banks up to $250,000 per depositor, per account ownership type, per financial institution.

So, does the FDIC insure share savings accounts at credit unions? No, the Federal Deposit Insurance Corporation does not cover those accounts. Instead, share savings accounts and other credit union deposit accounts are insured by the National Credit Union Administration (NCUA).

The NCUA’s Share Insurance Fund insures individual accounts up to $250,000. A credit union member’s interest in all joint accounts combined is insured up to $250,000 as well.

Share Savings Account vs. Bank Savings Account

Share savings accounts and savings accounts offered at banks aren’t that different. You can use either one to hold money that you’d like to save. For instance, you might use a share savings account for your emergency fund or to set aside money for a vacation.

There are, however, a few differences between share savings and bank savings accounts. Here’s how to tell them apart:

Share Savings Accounts	Bank Savings Accounts
Share savings accounts represent your ownership or membership in a credit union	Opening a savings account at a bank does not make you a part owner in the bank
Share savings accounts earn dividends, which represent a percentage of the credit union’s profits	Bank savings accounts earn interest, not dividends, with the highest rates typically offered by online banks
Savers may be able to open a share savings account with as little as $5	Minimum deposits for savings accounts at banks can vary, with some banks requiring $0 to open an account and others requiring $100 or more
The NCUA insures share savings accounts at member credit unions	The FDIC insures savings accounts at member banks
Shared branch banking allows credit union members to access their accounts at other credit unions without paying added fees	Banks may charge fees for accessing your accounts at branches or ATMs belonging to other banks

How to Open a Share Savings Account

If you’re interested in opening a share savings account, the first step is finding a credit union to join. As mentioned, there are membership requirements to join a credit union. Your ability to become a member may be based on:

Where you live, work, go to school or worship
Military association
Professional affiliation

For example, some credit unions cater to military members and their families while others are designed for state employees. On the other hand, some credit unions allow you to join simply based on where you live.

Once you find a credit union to join, you may be able to open an account online or at a branch. Whether you need to open a share savings account or a share draft (checking) account will depend on the credit union.

Opening your account at a credit union isn’t that different from opening an account at a bank with regard to the information you’ll need to provide. For instance, you’ll need to give your name, date of birth, Social Security number, address and phone number. You’ll also need to show proof of identification and make your initial opening deposit.

Once your share savings account is open you can open other accounts, such as a share draft account or a share certificate account. A share certificate account at a credit union is similar to certificate of deposit (CD) accounts that you can find at banks. They are time deposit accounts that allow you to earn interest on your money over a set maturity term.

Bottom Line

A share savings account could be just what you need if you’re looking for an alternative to traditional bank savings accounts. When comparing share savings accounts, consider the dividend rate you can earn and what you might pay in fees to have the account. And remember to look at any other benefits a credit union might offer, such as interest rate discounts on loans, when deciding which one you’d like to join.

Checking Account Tips

Consider talking to your financial advisor about the merits of share savings accounts and whether opening one is something you might want to do. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If your goal in opening a savings account is to get the highest rate, then you might want to look at what online banks have to offer. While you might not get branch banking access, online savings accounts can carry rates that are significantly higher than what you might find with credit union or traditional bank savings accounts. As an added bonus, the best online banks pay the highest rates while also charging the fewest fees