February 1, 2023Why are Share Certificates (CDs) Becoming So Popular?

Share certificates (like CDs at banks) are investment accounts that yield higher returns than traditional savings accounts. They offer a spectrum of financial perks with very little downside. Keep reading to find out if adding a share certificate to your savings plan is right for you. 

What Is a Share Certificate? 

Most credit unions offer three primary savings and investment accounts:  

  • Traditional share (savings) accounts  
  • Money market accounts  
  • Share certificates  

Among the three, share certificates generally offer the greatest yields. However, there is a tradeoff in exchange for earning higher dividends. With a share certificate, your money is locked in, meaning you cannot access or withdraw your funds without incurring a penalty. While this account condition might seem like a drawback, it’s often a blessing in disguise because it forces you to save money. 

How Does a Share Certificate Work? 

Because your money is locked in for a designated period, these certificates are broken up into varying terms. To see our current rates, visit: PEFCU’s current deposit rates. 

Characteristics of share certificate: 

  • While terms can vary, they typically range from six months to five years. 
  • Generally, the longer the term, the higher the rate of return you will earn. 
  • Your funds are locked in during your term. You can access your funds, but you will be required to pay a penalty (usually a portion or all the interest earned to date). 
  • Share certificates require a minimum deposit, such as $500 or $1,000. 
  • We also offer jumbo share certificates, which offer higher rates in exchange for much larger deposits. 

Advantages of Share Certificates: 

  • There is essentially no risk when investing in share certificates. Your account is federally insured by the National Credit Union Administration (NCUA). 
  • With guaranteed returns, they are an excellent alternative to the rollercoaster ride of the stock market. 
  • Our dividend rates are fixed, meaning you’ll know exactly how much your investment will return over the life of its term. 
  • In an emergency, you can withdraw funds from your account quickly and easily. However, you will incur an early withdrawal fee or forfeit a portion of the earnings on your account. 
  • Share certificates force you to save money by locking in your funds until the end of your chosen term. You cannot dip into this account for frivolous spending like you could with a traditional savings or money market account. 

Wise Ways to Use Share Certificates: 

Share certificates are versatile investment accounts that can earn a good return with no risk. While the higher dividends are also nice, the fact that your money is locked in helps so many PEFCU members.  

Here are several strategies for using share certificates to your advantage: 

  • Diversify Investments: A well-diversified investment portfolio is a winning strategy for any investor. Adding share certificates to your portfolio during a rising rate environment will yield strong dividends without the market risk. 
  • Conservative Investments: If you’re nearing retirement, it might be time to tone down your risk tolerance and move toward a more conservative investing approach. Share certificates will yield favorable dividends without unnecessary market risk. 
  • First-Time Investments: Share certificates are a great first step if you’re ready to start investing but don’t have the stomach for potential market losses just yet. They teach you not to touch your money for extended periods and let it grow through compound interest. 
  • Mid-Range Financial Goals (1 to 5 Years): Because your funds are locked in, share certificates are the perfect way to save for future financial goals, such as:
    • A down payment or closing costs on a new home 
    • A college fund for your child
    • A dream vacation for your family 

We’re Here to Help! 

These popular accounts might be the perfect tool to help boost your investment returns without added risk. If you want to learn more about share certificates or are ready to open an account, we’re here to help. Please stop by any of our branch locations or call 1-800-226-6673 to speak with a team member today. 



Each individual’s financial situation is unique, and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.    

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