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A man takes a break from backpacking to research share certificate advantages and disadvantages on his tablet.

Share Certificate Advantages and Disadvantages

Many people invest in share certificates to earn interest on their savings. They can be a great way to save for something you need or want, like a vacation, wedding, down payment on a home, or something else.

Although share certificates have many great things going for them, there are some situations where another investment may be a better choice. Because of this, it’s important to consider both the pros and cons of a share certificate to make sure it’s the best option for your needs.

What Is a Share Certificate?

A share certificate is a type of investment that is offered by credit unions. It is a savings account where you invest a certain amount of money for a fixed term. When the term ends (the maturity date), you can withdraw your money and the interest earned. If you decide to keep it, the share certificate will renew into the term listed in the disclosure.

Share certificates are often used to grow people’s savings. Instead of leaving their savings in their checking accounts, share certificates help propel earnings.

How Do Share Certificates Work?

Share certificates are similar to savings accounts and money market accounts, but they differ in two important ways. 

The first involves access to your money. With a savings account or money market account, you can make monthly withdrawals. With a share certificate, however, you agree to leave your money in the account until the maturity date. Early withdrawals may incur a penalties and may reduce earnings.

Share certificates also have fixed interest rates, which are usually higher than savings accounts and money market accounts. They have higher rates because you agree to leave your money invested until the maturity date.

To open a share certificate, you will need to meet the minimum deposit requirement, which varies on the product and term you choose. NextMark offers certificates with 3 year terms, up to 72 month terms. Choosing a term is dependent on the need for access to the funds.  

Share Certificate Advantages

There are several important reasons why share certificates are popular investments. They are easy to set up, flexible, and you don’t have to worry about losing your money in a market downturn.

Your Investment Is Safe

While some investments, like stocks, may go down in value, the money you invest in a share certificate is safe. NextMark Credit Union is federally insured by the NCUA (National Credit Union Administration) for up to $250,000 per share owner, per insured credit union, for each account ownership category. To figure out exactly how much of your money is insured, we invite you to use the estimator, an online tool that helps credit union members determine if their deposits are fully insured by the NCUA. We encourage you to check it out at

Guaranteed Returns

Because your investment is NCUA insured and the interest rate is fixed, you can easily determine how much you will earn before opening an account. Your returns are guaranteed. Check out our earnings calculator here.

Flexible Terms

Share certificates are highly flexible and you can select the best term for your needs. For example, you could select a short 3-month term if you think interest rates may rise in the near future, or if you know you’ll need to access your savings for a purchase. But you could also go with a 72-month term to lock in a great rate, knowing you can let your money grow over time.

Higher Interest Rates

Share certificates typically have interest rates that are higher than savings accounts or money market accounts. Your investment may earn more in the same time period.

No Monthly Fees

Some financial institutions charge monthly account maintenance fees for their savings accounts and money market accounts. Share certificates usually don’t have any fees. This lets you keep all of the interest your account earns. Don’t forget however, that early withdrawals may incur fees.

Share Certificate Disadvantages

Although share certificates have several great things going for them, they may not be ideal for all situations. Be sure to carefully consider the disadvantages before opening an account.

Early Withdrawal Penalties

When you open a share certificate, you agree to keep your money in the account until the maturity date. This could be a problem if you need to withdraw money for some reason. Although it is possible to withdraw money before the maturity date, you will be assessed an early withdrawal penalty, which could be a significant portion of the interest you have earned.

Less Liquid Than Other Savings Options

While share certificates require you to keep your money in the account to avoid an early withdrawal penalty, savings accounts and money market accounts allow you to make a certain number of monthly withdrawals without penalties.

Inflation Risk

Although share certificates usually have higher interest rates than savings accounts and money market accounts, the rate may not be high enough to keep up with rising costs during periods of high inflation. This is important to consider if you are thinking about opening a long-term share certificate. You can stay on top of our rates at

Interest Rate Risk

Because share certificates have fixed interest rates, there is a chance that interest rates may increase sometime in the future. If you have a long-term share certificate, you will not be able to take advantage of a better rate before the maturity date.

Other Investments May Offer Higher Returns

Other investments—like investing in certain stocks—may offer higher returns than share certificates. These investments may have increased risk, however. Because the stock market is often unpredictable and volatile, it is possible that your investment could go down in value. We ask that you consult your financial advisor for details.

Is a Share Certificate a Good Investment?

A share certificate may be a good investment if you want to earn a high-interest rate on your savings, and you also know that you won’t need to access your money during the term. Additionally, your money is insured by the NCUA, and you don’t have to worry about fees limiting your earnings potential.

A share certificate may not be a good choice if there’s a chance you may need to make a withdrawal before the term ends. They typically aren’t good for emergency funds, for example.

Opening a Share Certificate

Getting started with a share certificate is very easy, and it doesn’t take much time. You can open an account in just a few minutes to start earning interest.

If you have never opened a share certificate account before, the following article outlines the process.


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