Can You Add Money To A Share Certificate?

Can you add money to a share certificate? Learn everything you need to know about these high-yield, low-risk investments.

If you want to earn dividends on your money, you’re likely evaluating different investment options. Share certificates are a low-risk, fixed-term option for credit union members who want to put their money to work. They’re a great way to diversify your investment and stabilize a volatile portfolio.

Here’s everything you need to know about share certificates to help you decide if they suit your financial goals. Let’s look at their pros and cons, the steps to deposit, and whether you can add more funds to an existing share certificate.

What’s A Share Certificate?

You can think of share certificates as the credit union counterpart of bank certificates of deposit (CD). Like CDs, share certificates are savings accounts with set durations and fixed annual percentage yields (APY).

So how does a share certificate work? Depositing money into a share certificate means you agree to leave your funds for a fixed term. When you give up access to your money for that period, the credit union will pay you dividends in return and will compound your dividends either daily or monthly.

The length of share certificates varies depending on the terms your credit union offers. Some last up to a few months, while others can stretch out for years.

What happens when your share certificate reaches maturity? You have several options, including rolling your funds into a new share certificate, withdrawing your money, or transferring it to a savings or checking account.

How Are Share Certificates & CDs Different?

Share certificates versus CDs: which one should you choose? They’re pretty similar, with a few notable differences. For starters, non-profit credit unions offer share certificates exclusively to their members – meanwhile, for-profit banks provide CDs to any customer.

Another difference is that share certificates pay dividends, while CDs earn interest. Typically, share certificates offer higher returns for depositors.

Both share certificates and CDs are backed by the federal government, ensuring depositors are protected if their credit union or bank fails. However, share certificates are insured by the National Credit Union Administration (NCUA), while CDs are covered by the Federal Insurance Company (FDIC). Both agencies offer the same coverage, insuring up to $250,000 per depositor.

Can You Add Money To A Share Certificate? Or Withdraw Your Funds?

When you open a share certificate, you select a term length and commit to keeping your money deposited for that duration. Once your funds are in, the term begins, and the deposit is locked.

Can you add money to a share certificate? Unfortunately, in most cases, no. Early withdrawals aren’t an option either and doing so could result in a hefty penalty.

While the lack of flexibility and liquidity might seem like a drawback, there’s a reward waiting for you at the end of your share certificate’s term. Your dividend rate won’t change, regardless of market fluctuations, guaranteeing earnings when your share certificate matures. Plus, share certificates generally have higher returns than regular savings accounts, making the wait worth it.

How Do I Deposit To A Share Certificate?

Opening a share certificate is as easy as opening a savings account. Most financial institutions will let you do so in person or online.

Here are the steps to take if you’re considering this investment product:

Consider Your Options

Before opening a share certificate, ensure it supports your financial goals. While they usually have higher returns than bank CDs and savings accounts, they have lower earnings than stocks and mutual funds. However, they’re also significantly less risky. Share certificates are ideal for investors who want a safe place for short-term savings to earn moderate returns.

Choose The Right Share Certificate

Credit unions offer different share certificates. Evaluate the current market before selecting and opening one. If you think rates will rise soon, consider choosing a share certificate with a short maturity date. That way, you can reinvest the funds at a higher rate soon.

If you lock into a long-term share certificate and interest rates increase, you’ll miss the opportunity to take advantage of higher earnings.

Prepare The Required Documents

If you’re a new credit union member, you might have to present proof of identification and other requirements to open a share certificate. You’ll generally need photo identification, such as a passport or driver license, as well as your Social Security number. Check your credit union’s website or contact them to learn more about the required documents for opening a share certificate.

Open Your Share Certificate & Fund Your Account

Opening a share certificate is a fast and painless process. All it takes is filling out a form and submitting it online or in person. The final step is to fund your account through a check, fund transfer, or wire transfer.

What Are The Pros & Cons Of A Share Certificate?

If you’re a credit union member, share certificates are one of the best ways to grow your money with little risk. Here are some reasons to open a share certificate and some minor disadvantages to consider:

Pros

Fixed Dividend Rate

With a share certificate, you know exactly how much in dividends you’ll earn by the end of the term. These low-risk investment products have a fixed dividend rate, protecting your money from the market’s fluctuations. You’ll receive the full dividend if you keep your funds in deposit during the agreed period.

Flexible Term Options

Depositors can choose how long to lock their money in a share certificate. Generally, the longer the term, the higher the dividend you’ll receive when your share certificate matures. However, only agree to a term you can commit to.

Withdrawing before the term’s up can result in an early withdrawal penalty. In addition, you don’t want to commit to a fixed dividend rate for a long period if you know rates will rise soon.

One strategy to consider is a share certificate ladder. You open several share certificates with various terms and maturity dates. That way, you can maximize your earnings and access your funds at different times without paying penalties.

Low Deposit Requirements

Investing can be intimidating because many investment products require a high initial deposit. Fortunately, share certificates usually have lower deposit requirements. That makes them ideal for beginner investors who aren’t ready to part with large sums of money.

Financial Protection

You never want your hard-earned money to disappear without a trace. Share certificates give you peace of mind because they’re backed by the NCUA. If your credit union fails or files for bankruptcy, you have coverage of up to $250,000, saving you from financial loss.

Cons

No Liquidity

Putting funds in a share certificate means giving up access to your money for a set amount of time. Lack of liquidity is something to consider before using this investment product.

Moderate Earnings

While share certificates typically have higher rates than savings accounts and CDs, they’re not high-return investments like mutual funds and stocks.

How Long Can You Keep A Share Certificate?

Share certificates have various term lengths. Some last up to a few months, while others you can keep for several years. It all depends on your credit union and what term lengths they offer.

Once your share certificate matures, you can roll your funds into a new one to keep growing your money. Otherwise, you can withdraw your funds or transfer it to a savings or checking account.

Open A Share Certificate At A+ Federal Credit Union

Do you want to do more than keep your money in a savings account? Explore share certificates with A+ Federal Credit Union and enjoy higher returns. A+FCU offers terms between 6 and 60 months, allowing members to choose a share certificate that suits their short and long-term financial objectives.

Membership required. Insured by NCUA. A penalty may be imposed for early withdrawals. Conditions and restrictions may apply. Subject to change without notice.