CDs vs. Share Certificates: Are They the Same Thing?

November 01, 2023

Certificates of deposit (CDs) earn interest and share certificates earn dividends on your savings for a fixed amount of time. They have a lot in common, with one major difference: Generally, banks offer CDs, and credit unions offer share certificates. Some state-chartered credit unions may offer CDs as well if their state laws permit it.

How Do CDs and Share Certificates Work?

Both CDs and share certificates allow you to invest your savings to earn interest or dividends over a set time period. CDs and share certificates often have higher earnings than regular savings accounts, and rates are typically fixed. That means that even if rates drop while your money is in an account, your deposit will continue earning at the original rate.

Earning interest or dividends from a CD or share certificate is simple. After opening an account, you make a deposit, choose a timeframe or term, and let the money grow. But there's a catch: Most CDs and share certificates penalize you for withdrawing money before the term ends.

When the term on your CD or share certificate ends, you can withdraw your principal and earnings or reinvest them in another account.

Like saving accounts, CDs and share certificates, are typically insured. If you open one at a federally insured bank or credit union, the government guarantees your balance up to $250,000 per account ownership category, per institution.

How CDs and Share Certificates Differ

At first glance, CDs and share certificates sound like the same thing. But there are a few subtle differences to be aware of:

  • Issuer: The primary difference between CDs and share certificates is where you can purchase them. Banks offer CDs, while credit unions offer share certificates. State-charted credit unions may offer CDs as well.
  • Earnings: Both CDs and share certificates allow you to earn money using your savings. With a CD, those earnings are called interest. With a share certificate, they’re called dividends.
  • Insurance: The FDIC insures CDs at banks, while the NCUA provides similar coverage at credit unions. 
  • Accessibility: At most banks, anyone can open a CD. But to open a share certificate, you must be a credit union member. Some credit unions have specific eligibility requirements for membership based on location, profession or other factors.
  • Rates and fees: These vary by institution. Credit unions, which are member-owned nonprofit organizations, may offer lower fees and higher dividend rates on savings products. On the other hand, for-profit banks may have higher fees and lower interest rates. Online banks, though, tend to be an exception and may offer competitive rates and low fees.

Should You Open a CD or Share Certificate?

Both CDs and share certificates are valuable savings tools in the right situations. If you have a specific savings goal and the ability to set money aside for a set time period, a CD or share certificate can help accelerate your savings.

Before opening a share certificate or CD, shop around, compare rates and don't forget to read the fine print.


Insured by NCUA.