What Is a Share Account at a Credit Union?
Understand what a credit union share account is, its role in membership, and how it signifies ownership, distinguishing it from traditional banking.
A share account at a credit union serves as a fundamental financial product, similar in function to a savings account at a traditional bank. This account establishes an individual’s membership, signifying a unique relationship with the institution. Unlike customers at for-profit banks, a share account holder becomes a part-owner of the credit union, which operates as a not-for-profit financial cooperative. This initial deposit is often a prerequisite for accessing the full range of services a credit union offers.
The Membership Foundation
A share account fundamentally represents an individual’s ownership stake and membership in a credit union. Credit unions are financial cooperatives, owned and controlled by their members, operating on a “people helping people” principle rather than maximizing profits for external investors. This structure contrasts with for-profit banks, which are owned by shareholders and serve customers. Opening this initial share account is typically the first step required to become a full member, granting access to all other financial products and services.
The term “share” reflects that members are considered shareholders, emphasizing their collective ownership. This ownership provides members with a voice in the credit union’s management, including the right to vote on various issues and elect the board of directors. A minimum deposit, often as low as $5, is usually required to activate this foundational share account, symbolizing a direct investment in the cooperative.
Variety of Share Accounts
Once the foundational share account, which establishes membership, is opened, members gain access to a broader array of financial products, all broadly categorized as “share accounts.” These offerings serve diverse financial needs while maintaining the underlying principle of member ownership. Each type is designed to function similarly to its banking counterpart, but with the distinct “share” designation.
Common types include:
Share savings accounts: These are the basic vehicles for accumulating funds and earning dividends.
Share checking accounts: Often termed “share draft accounts,” these function like traditional checking accounts for daily transactions, bill payments, and debit card use.
Share certificates: Similar to certificates of deposit (CDs) at banks, these offer fixed interest rates for a set term.
Share money market accounts: These provide a hybrid option, offering higher dividend rates than standard savings accounts with some check-writing capabilities.
Opening a Share Account
To open a share account, individuals must typically gather specific preparatory information and documentation. This generally includes government-issued identification, such as a driver’s license or passport, along with their Social Security Number or Tax Identification Number. Proof of address, such as a utility bill or bank statement, is also commonly required to verify residency.
Credit unions have a “common bond” eligibility requirement, which dictates who can join. This common bond might be based on employment with a specific company, membership in an association, or living, working, or worshipping within a defined geographic community. Applicants can usually verify their eligibility through the credit union’s website or by contacting a representative. A small initial deposit, typically ranging from $5 to $25, is often needed to activate the primary share account and finalize membership. Accounts can be opened through an online application portal or by visiting a credit union branch in person.
Protecting Your Funds
Funds held in share accounts at federally insured credit unions are protected by the National Credit Union Administration (NCUA). The NCUA is an independent federal agency established by Congress to charter and supervise federal credit unions, while also providing deposit insurance. This insurance is backed by the full faith and credit of the United States government, ensuring the safety and security of member deposits.
The NCUA provides share insurance coverage up to at least $250,000 per member, per credit union, and per ownership category. This coverage limit applies to various account types, including share savings, share checking, money market share accounts, and share certificates. This level of protection for credit union members is comparable to the deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC) for bank customers.