CDs Vs. Share Certificates: What’s The Difference?

Key takeaways

CDs and share certificates are nearly identical fixed-term deposit accounts that earn guaranteed returns over a set period.
The main difference is that CDs are offered by banks and pay interest; share certificates are offered by credit unions and pay dividends.
Both are federally insured up to $250,000 per depositor (FDIC for CDs, NCUA for share certificates).
Credit unions often offer slightly higher rates than traditional banks, but online banks frequently compete with the best rates.

Both certificates of deposit (CDs) and share certificates are low-risk deposit accounts where your money can grow at a fixed rate. The main distinction between them is that CDs are products offered by for-profit banks, while share certificates are offered by member-owned, not-for-profit credit unions.

Understanding the differences can help you choose the right option for your savings goals and decide whether joining a credit union might benefit your overall financial strategy.

Differences between CDs and share certificates

Feature	CDs	Share certificates
Institution	Offered by banks	Offered by credit unions
Earnings	Pay interest	Pay dividends
Insurance	Insured by FDIC	Insured by NCUA
Membership	No membership required	Credit union membership required
Rates	Vary by bank type	Often competitive due to profit-sharing
Accessibility	Widely available	Limited to eligible members

What is a certificate of deposit?

A CD is a type of bank account that’s opened for a predetermined amount of time and earns interest at a guaranteed rate. Generally, the account holder cannot withdraw the principal from the account until the CD’s term ends, or else they’ll incur an early withdrawal penalty.

Key features of CDs:

Fixed interest rates for the entire term
Terms typically range from three months to five years
FDIC insurance up to $250,000 per depositor, per ownership category, per institution
Variety of types available (no-penalty, bump-up, step-up CDs)

CDs work best for savers who have a specific timeline for their money and want guaranteed returns without market risk.

What is a share certificate?

Share certificates, sometimes referred to as credit union CDs, are largely the same as CDs, except they’re offered by credit unions. The earnings on share certificates are called dividends rather than interest.

Because credit unions are not-for-profit institutions, their profits are distributed among members — who are, by nature, shareholders in the credit union — in the form of dividends. This structure often allows credit unions to offer higher rates or lower fees than traditional banks.

Key features of share certificates:

Fixed dividend rates for the entire term
Similar term lengths to bank CDs
NCUA insurance up to $250,000 per depositor, per ownership category, per institution
Requires credit union membership to open

Check out the best 1-year credit union CD rates.

Who should get a share certificate vs. CD?

The choice between a share certificate and CD often depends on your banking preferences and access to credit union membership. Here’s a side-by-side comparison:

A CD is best if you:	A share certificate is best if you:
— Want the widest selection of institutions and products — Prefer banking with a traditional bank or online bank — Need the convenience of widespread branch locations — Want to easily compare rates across many institutions — Don’t meet credit union membership requirements — Prefer the simplicity of not needing membership	— Are eligible for credit union membership — Value community-focused banking — Want potentially higher rates due to profit-sharing — Prefer lower fees and member benefits — Want a voice in how the institution operates — Value personalized customer service

Compare today’s best CD rates →

Should you join a credit union?

To open a share certificate, you must first be a member of a credit union that offers them. Credit unions often serve a specific community, geographic area, type of employee, or association, so you’ll need to meet membership requirements.

Benefits of joining a credit union:

Lower fees and higher yields: Because profits are shared among members, more money is funneled back in the form of dividends and lower fees.
Community-focused approach: Credit unions typically serve members with shared commonalities and are committed to community support.
Member ownership: Every member has ownership in the credit union and voting rights on governance decisions.
Personalized service: Smaller size often means more personalized customer relationships.

If you’re interested in joining a credit union, check out Bankrate’s picks for best credit unions and our guide to choosing the right one for you.

Alternatives to share certificates and CDs

If you need more flexibility than CDs or share certificates provide, consider these alternatives:

High-yield savings accounts: Earn competitive rates with full liquidity and no early withdrawal penalties
Money market accounts: Combine higher rates with limited check-writing and debit card access
Treasury bills: Government-backed securities with terms from 4 weeks to 1 year
I Bonds: Inflation-protected savings bonds that adjust rates based on inflation
No-penalty CDs: Earn CD-like rates with the ability to withdraw funds without penalty

When to consider alternatives: Standard CDs and share certificates work best for specific savings goals with known timelines. However, they’re not ideal for emergency funds or money you might need access to, since early withdrawal typically incurs penalties.

For funds requiring more liquidity, high-yield savings accounts offer competitive rates with full access to your money. Current top savings rates are often similar to or even greater than some CD rates.

Compare high-yield savings accounts →

Bottom line

Whether you choose a CD or share certificate depends mainly on your institution preference and eligibility for credit union membership. Both offer guaranteed returns and federal insurance protection, making them excellent low-risk savings options.

If you’re looking for the highest yields, shop around and compare offerings from traditional banks, online banks, and credit unions. Credit unions often provide competitive rates and additional member benefits, while online banks frequently offer some of the market’s best CD rates.

Ready to start earning more on your savings? Find today’s best CD rates →

FAQs

Both CDs and share certificates are equally safe, as they’re both federally insured up to $250,000 per depositor, per ownership category, per institution. CDs are protected by FDIC insurance, while share certificates are protected by NCUA insurance. Both provide the same level of security and government backing.
A share certificate is essentially the credit union equivalent of a bank CD. Both are fixed-term deposit accounts that earn guaranteed returns, require you to lock up your money for a specific period, and carry early withdrawal penalties. The main differences are the institution type (credit union vs. bank) and terminology (dividends vs. interest).
Generally, you cannot add money to a standard CD or share certificate after opening. These are designed as fixed-deposit accounts where you deposit a lump sum and leave it untouched until maturity. However, some institutions offer add-on CDs or share certificates that allow additional deposits during the term, though these typically come with lower interest rates than standard products.