If you're fortunate enough to have some extra savings and want to earn higher dividends (a sum of money paid regularly by a company to its shareholders out of its profits) than a regular savings, checking or money market account, consider a share certificate. A share certificate account is similar to a certificate of deposit (CD), but it is issued by a credit union (like Chartway), rather than a bank. If you’re looking for earnings on your savings, a share certificate is a beneficial option to grow your savings. While you cannot withdraw your funds during the pre-selected length of the term without penalty, you will most likely earn a higher rate than any of the above-mentioned options. Here are a few more reasons why you may want to invest in a share certificate:
The dividends, or earnings, you can make on a share certificate are typically quoted in terms of the annual percentage yield, or APY. This rate takes into account the compounding period, which is the frequency with which returns are added to the account. Credit unions can choose to compound rates on a yearly, quarterly, monthly or even daily basis. For Chartway’s current share certificate rates, click here.
Guaranteed or fixed rate of return
There are no unknowns when you invest in a Share Certificate. You pick the deposit amount, the term and the rate. As long as you don't withdraw the funds, you'll be able to calculate your dividends upon maturity at the onset of your investment.
Short- and long-term investing
With terms as short as 6 months and up to 71 months, you have a wide range of investment options. If you think rates will rise, invest in a shorter term. If you think rates will decline or remain the same, invest in a long-term share certificate. Keep in mind, the longer the term, the higher the rate. Likewise, the shorter the term, the fewer dividends you earn.
Low initial opening deposit
You can open a share certificate with as little as $100, while a money market account often requires a larger deposit and doesn't earn as high a rate. For higher deposit amounts, jumbo accounts are available and they generally earn a higher rate.
Share certificates are federally insured by the National Credit Union Administration (NCUA), a US government agency. Each account is federally insured up to $250,000, so you know your funds are safe and sound.
Of the many savings products credit unions provide, share certificates offer a higher-yielding but still safe way to invest money for a set period of time. Consider whether the increased earnings offset locking away the money for the required time, and decide which one is right for you.