Share certificate vs. CD (certificate of deposit)

A man checks his certificate of deposit from his phone.
August 24, 2022 | Katie Levene

A certificate of deposit from a bank or a share certificate from a credit union is a great way to reach your financial goals quicker. It’s a low-risk investment with a higher APY than even a high-rate savings account. Here is everything you need to know to make a certificate work for you.

What is a certificate of deposit?

A certificate of deposit (CD) from a bank is a type of savings account that pays a set interest rate on a fixed amount of money for a specified period of time, or term, which ends on the maturity date. You'll find terms from a month to five years or more.

Certificates of deposit are insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC).

Note: While most CDs offer a fixed dividend for the entire term, some have variable rates that may be determined by a market index such as the prime rate, the consumer price index or yields on U.S. Treasury securities.

What is the difference between a CD and a share certificate?

Alliant offers share certificates, not CDs. So, a common question we get is, “Should I get a share certificate vs. a CD?" The short answer is that there isn't much of a difference. A credit union share certificate (or simply, certificate) provides the same benefit to the customer as a certificate of deposit at a bank. 

Since credit union members are the owners of the credit union, they have shares of the credit union – hence, the term “share certificate”. So, credit unions pay “dividends” on the certificates instead of “interest” that banks pay on their CDs.

They are pretty much the same in purpose and both pay a fixed amount of money for a specific term. Certificates are insured for the same amount as banks, up to $250,000, but by a different institution, the National Credit Union Administration (NCUA).

You could get all the benefits of a certificate of deposit from an Alliant Credit Union Certificate.

How do share certificates work?

Let’s break down how certificates work and look at an example. Your goal is to go on the vacation of your dreams, but you want some extra help getting there. The stock market is volatile and you want to ensure you don’t lose any money while you’re saving for this trip. You plan on booking that trip two years from now, so you decide a 24-month share certificate is a good option because it will give you a higher rate than your savings account.

You have $3,000 to put away and the rate on the 24-month certificate is 2.65% APY. You want to make the most of your money, so you choose to keep your monthly interest payments in the certificate. You cannot access this money for two years without an early withdrawal penalty. So, it’s important that you have an emergency fund for those unexpected expenses that may pop up.

At the end of the two years, you’ll have $3,161.11. That’s an extra night out!

Why invest in a certificate?

If you’ve got cash you can comfortably lock up for a while, certificates could provide higher interest rates than regular savings accounts. Plus, the principal is safe, thanks to that NCUA insurance. If you were to put that cash in stocks or bonds, you could lose some or all of your initial investment.

Returns on stocks and bonds typically outpace certificate rates in the long run; but, certificates have a much lower risk and can help you earn more on your money. Also, your earnings won’t be eroded by fees, as may be the case with other types of investments such as mutual funds or money market accounts.

Finally, the range of maturity terms in a certificate gives you the flexibility to choose certificates that provide access to your money when you expect to need it.

Who should buy certificates?

Because you choose certificates with terms that suit your needs, they can work well for investors at almost all ages and stages of life:

  • Parents and grandparents might want to begin investing in certificates for higher education 10 to 15 years before a child is expected to begin college.
  • Young professionals can invest in certificates for a few years to help save for a down payment on their first home or to pay for a wedding.
  • Middle age is the perfect time to use certificates to build a retirement fund.
  • At any age, certificates can help save money for a special occasion, like a vacation or home improvement project.

By staggering or laddering certificates, an investor can get long-term rates of return while preserving the ability to capture the benefit of increases over time. Rather than purchasing a single large certificate, break the sum you have to invest into five parts and put equal portions into a one-year, a two-year, a three-year, a four-year and a five-year certificate.

When the one-year certificate matures, take the money and reinvest it in a five-year certificate. Do that again as each certificate matures and after five years, you’ll have five certificates that yield long-term dividends yet mature each year.


A certificate or CD can help you get to your savings goal quicker than many other accounts. If you want more flexibility, check out three types of accounts for smart savers or get inspired with passive income opportunities so you can earn more.

Katie Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.

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