A share certificate can be a great way to earn a high interest rate, but both require patience.

The Basics

Share certificates are a simple way to earn more on your savings by setting money aside for a specific period of time. When you open a share certificate, you choose a term—anywhere from a few months to several years—and your money earns a fixed interest rate for the entire term. This means steady growth and predictable returns, often at a higher rate than a regular savings account.

Because the rate is locked in, your savings are protected from market ups and downs. Just keep in mind that rates can change over time, so the rate available today may not be the same in the future. Choosing the right term can help you make the most of your savings while keeping your goals on track.

Cashing Out

When a share certificate reaches the end of its term, it “matures.” At that point, you’ve finished earning interest and can decide what to do next—withdraw your funds or reinvest them. If you choose to take the money out, your credit union can move it into your checking or savings account, transfer it elsewhere, or provide a check. If no action is taken by the maturity date, the share certificate will typically renew for the same term at the credit union’s current rate.

You can access your money before a share certificate matures, but early withdrawals usually come with penalties. In some cases, those penalties may reduce or eliminate the interest earned, and in certain situations, they could even impact the original amount deposited. Because of this, it’s best to open a share certificate with a term that fits your financial needs and timeline.

Compounding is Key

The interest you earn on a share certificate is called the yield. Your yield is based on the annual percentage yield (APY), which reflects both the interest rate and how often interest is added to your account. The way interest is calculated—simple or compound—also affects how much your savings grow over time.

Simple interest is earned only on the original amount you deposit. Compound interest, which is most commonly used with share certificates, allows you to earn interest on both your original deposit and the interest you’ve already earned. Over time, this compounding can help your savings grow faster.