Financial Education

Share Certificates are offered at credit unions like Winnebago Community Credit Union, and banks provide CDs to help you achieve your financial goals.

What is a Share Certificate at Winnebago Community Credit Union? A Share Certificate is a unique savings account that allows you to earn a higher dividend in exchange for committing to not making withdrawals for a specific period. This longer-term savings instrument is attractive to those who want to build stable wealth, however early withdrawals may apply. At Winnebago Community Credit Union, our Share Certificates are NCUA insured and are protected against loss for depositors, offering you a secure and stable way to grow your savings. You can choose various term lengths to best suit your financial plans and goals.

What is a Certificate of Deposit (CD)? A Certificate of Deposit operates similarly to a Share Certificate. It allows you to earn a higher interest rate by committing to keep your principal amount deposited for a predetermined length of time or "term." CDs are a secure and reliable way to grow your savings over the long term. CDs are Federally backed by the FDIC, which makes them a secure option.

Advantages and Disadvantages of Share Certificates and CDs

Here are some advantages and disadvantages of Share Certificates and CDs to help you make an informed decision:

Advantages: 1. Share Certificates and CDs typically offer higher dividend rates or interest rates compared to standard savings accounts, making them excellent options for long-term savings goals. 2. Share Certificates and CDs are federally insured by reputable agencies, providing security for your deposited capital up to the insured limits.

Disadvantages: 1. These savings options do not allow immediate access to funds without incurring early withdrawal penalties, which may not be suitable for individuals who require flexible access to their savings. 2. The fixed-rate nature of Share Certificates and CDs means that you lock in a specific interest rate, which could potentially impact your earnings if interest rates fluctuate in the future.

What is the difference between them? Both function similarly yet differ in terminology, CD vs Share Certificate or interest vs dividends. Both are saving instruments that allow depositors to earn a higher interest rate in exchange for keeping the principal amount on deposit for the life of the selected term. The effective interest rate increases with the duration of the term, and any interest earned is surrendered back to the financial if deposits are withdrawn early. Ownership is the most notable difference between the two. Credit unions refer to depositor interest earned as a "dividend yield" because their depositor and shareholder members are one and the same.

Opening a Share Certificate

To open a Share Certificate account, you must first become a member of Winnebago Community Credit Union by visiting a branch or going online to become a member and join. You can join WinCU by living or working in Winnebago, Fond du Lac, or Outagamie counties. You are also eligible if an immediate family is a WinCU member. As you join, be sure to inquire about WinCU's Share Certificates. You will then need to determine the term length, which can vary from a few months to five years, giving you the power to align your savings with your financial goals and the timeframe in which you want to have access to your funds. Typically, the shorter the term agreement, the lower the dividend rate. The longer-term agreement, the higher the rate, but you will not have access to your money for a more extended period of time. You will then need to determine how you will fund the Share Certificate, for example, an existing account, a check, or direct deposit. Most CUs require a minimum deposit amount, so be sure to read the agreement's requirements before making a decision.

Another factor to consider is how the interest rate or dividend yield may vary with different term lengths. Many CUs offer higher rates on longer-term Share Certificates, valuing the commitment of your funds for the extended period, thus rewarding you with a higher yield. This means that by choosing a longer-term Share Certificate, you could potentially earn more on your savings, providing more financial security for your future. For current rates and options, please visit WinCU.org/rates/deposit-rates.

Finally, upon maturity, you typically have a grace period to withdraw the funds and renew or transfer the Share Certificate to another account. If you withdraw funds before the maturity date, there is typically an early withdrawal penalty that can affect the interest earned. Share Certificates are considered a safe investment as the NCUA typically insures them up to $250,000 per depositor.

At Winnebago Community Credit Union, we are committed to helping you make informed decisions about your long-term savings. Contact us to learn more about our Share Certificates and find the best option for your financial needs.