What is a Share Savings Account and How Do They Work?

What is a Share Savings Account? When you open a share savings account, you gain membership at a credit union.

These types of accounts set up your share of ownership and enable you to use the impressive features a credit union has to provide as a member. Credit unions aren’t the same as regular banks.

If you open a share savings account, you also join the owners of the institution. These accounts pay variable dividends, the same as a bank account’s interest. They’re liquid and meant for payments and spending.

If you’re familiar with savings accounts at regular banks, you already know the basics of a share savings account. In today’s article, we’ll discuss share savings accounts, how they work, and the types of share saving account available!

Table of Contents

What is a Share Savings Account?

Banks and credit unions aren’t that different but use different terms.

For instance, credit unions discuss their members whereas banks discuss their customers, also known as account holders. Customers or bank account holders have savings and checking accounts whereas credit union members have share accounts.

So, if the provided services by both institutions aren’t that different, what’s the deal with the different names? Why complicate things?

It all comes down to the definition of credit unions and banks. Think of share savings accounts as regular savings accounts at a bank. There are also draft accounts at a credit union. We’ll touch on draft accounts later in the article, but they’re basically checking accounts.

The reason why credit unions don’t stick to the “savings” and “checking” names is that the “share” in question stands for the financial share in the institution.

At a credit union, you’re a member with a financial share in the institution instead of just a regular customer at a local bank.

See our related article about The 5 Best Banks With Free Checking Accounts With No Deposit. Discover the best banks where you can open a checking account with no minimum opening deposit.

What Happens When You Put Your Money in a Credit Union?

You can open a share savings account at a credit union

What is a share savings account and what happens when you put your money in a credit union?

Customers put their money in a bank. So, if you’re a bank customer, the terms “checking” and “savings” represent the financial services you’re using and getting charged for.

However, putting your funds in a credit union is completely different. It’s more than just passing over a check. When you team up with a credit union, you’re gaining a membership status.

You’re also becoming a partial owner in the institution. These institutions aren’t owned and operated by just one owner, but by members who choose the volunteer Board of Directors that manage the institution. But, how is all of this information associated with what your account is called?

Your share saving account stands for your share of the institution, so it’s referred to as a “share” account. You can also obtain a checking account (a share account you can draft checks from).

The terms might seem insignificant, but they serve as a reminder of the main differences between credit unions that serve their shareholders and banks that serve their members.

What is a Share Savings Account and How Does it Work?

Every account owner in a credit union is a part-owner of the organization, and as such, they have a voice in that organization’s management, meaning, they can also vote on different issues.

It doesn’t matter if you have more or fewer funds than the other members, everyone is treated equally and gets a vote. What’s great about credit unions is that they keep your money safe.

Therefore, if you’re worried about the safety of your deposit, you’ll be relieved to know that your money will be in an FDIC-insured bank account.

People confuse a shared account (an account that you share with somebody else) with a share account. However, they’re very different. Though you can have a joint share savings account, as well.

You can also have an individual account.

Now, let’s learn more details about share savings accounts and share draft accounts and how they work.

Share Savings Accounts

Credit unions usually pay interest on deposits in share savings accounts in dividends, depending on the share. The rate might be high or low, depending on how much the organization is willing to compete for new members. It also depends on the interest rates.

If you prefer to earn more and you’re okay with some limitations, you can ask if the institution has a money market account with higher rates or a certificate of deposit.

Usually, these accounts don’t come with debit cards, however, you can easily transfer enough funds into your checking account for everyday expenses and bills from your account.

Share Draft Accounts

The biggest advantage of share draft accounts is that they have no limits on how frequently you can use them, with exception of businesses doing multiple transactions every month.

A share draft account is perfect for everyday spending funds. If you buy goods with a debit card, pull out cash from ATMs, write checks, or pay bills online, this type of account is a great choice.

It’s also referred to as a checking account.

Note that most share draft accounts don’t pay interest. However, certain organizations provide interest checking accounts and reward checking which enable members to earn some interest.

The money in your share savings account can serve as collateral for loans in some cases. This process will help you improve and build credit.

See our related article The 5 Best Personal Loans From a Credit Union. Know the different types of personal loans you can receive from a credit union.

Other Types of Accounts at Credit Unions

Every account owner in a credit union is an owner of the organization

When you partner with a credit union, you can also pick other types of share accounts like IRA and CDs. IRA stands for retirement accounts while CDs represent certificates of deposits.

If you want to step up your earnings a notch, opt for share certificates. They’ll ask for funds to be kept on deposit for a certain period.

IRA keeps insured credit union shares exclusively.

What is a Share Savings Account and is it Worth it?

What is a share savings account? In short, a share savings account is basically the same as a bank’s checking or savings account and stands for a person’s financial share at a credit union.

You can set up joint or individual ownership of the account depending on your needs. Note that some of these accounts come with insurance for deposits up to $250,000.