Confused by CD or Share Certificate terms? Find out what Certificate terms mean before investing your money.

Have you considered opening a Share Certificate at a credit union or Certificate of Deposit (CD) at a bank, but unsure of what all the terminology means? We break down what you need to know so you can feel secure when deciding to open a Share Certificate or CD.  

CD and Share Certificate Terms Defined

June 2, 2016

Confused by CD or Share Certificate terms? Find out what Certificate terms mean before investing your money.

Have you considered opening a Share Certificate at a credit union or Certificate of Deposit (CD) at a bank, but unsure of what all the terminology means? We break down what you need to know so you can feel secure when deciding to open a Share Certificate or CD.

Term: the amount of time money is locked into a Certificate; ranging from six months to seven years. Once the term is over, the money may be taken out of the Certificate or re-invested in another Certificate.

Earnings: equate to dividends on Certificates or interest on CDs. Paid monthly or quarterly; may be posted into the account or into a separate Savings Account.

Annual Percentage Yield (APY): the rate of return reflecting the total amount of dividends paid on a Certificate based on the dividend rate and compounding frequency. Often higher for compounding Certificates and Certificates with longer terms.

Compounding: dividend earnings are added back into the Certificate and increase the Certificate balance. This allows the added earnings to earn dividends in future payment periods.

Non-compounding: dividend earnings are deposited into a separate Savings Account to allow access to the earnings. Since the dividends are held separately, the Certificate balance stays the same throughout its term.

Maturity: the date the Certificate ends (or matures), making the funds available for withdrawal without a penalty. If funds are withdrawn from a Certificate before the maturity date, a penalty may be assessed in the form of fees or loss of dividend earnings.

Liquidity: the ability to translate financial assets into cash. A Certificate has a very low liquidity compared to a Savings Account, since the money in a Certificate is locked into the account until the maturity date. A six-month Certificate has much higher liquidity than a five-year Certificate.

Want to know even more about Share Certificates? Check out this eBook for in-depth Certificate information plus a smart strategy to make the most out of your money. Have questions? Ask us below!

Have You Considered a Laddering Strategy?

Reap the higher dividends of certificates while maintaining liquidity for easy access to your cash.  Learn how Certificate Laddering works.

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Equal Housing LenderThis credit union is federally insured by the National Credit Union Administration.

Redstone is an Equal Credit Opportunity Lender.

This content is provided for informational and educational purposes only and considered accurate as of the date posted. Views and opinions expressed in comments do not constitute an official endorsement by Redstone Federal Credit Union® or its affiliates. Redstone encourages you to seek professional advice for your personal situation before making any financial decision and is happy to assist you at any of our branch locations.

Must be RFCU® member to obtain or use any product or service. Must open a share savings account to join RFCU. A $5 minimum balance is required to open a share savings account and must be maintained in the share savings account at all times. Age and other restrictions may apply.

Fees and other conditions could reduce earnings on Share Certificate account. A penalty will be imposed for early withdrawal of principal prior to maturity. Non-compounding Share Certificates will have dividends credited to the primary share account. Dividends cannot remain on a non-compounding Share Certificate. The payout of dividends is mandatory.

Member’s Choice Certificates: Member’s Choice Certificates are available for a limited time only. Rates, terms, and conditions are subject to change at any time. Minimum balance required to open and maintain the Member’s Choice Certificate account and to earn dividends is $1,000. Option to open multiple Member’s Choice Certificates isavailable. Member’s Choice Certificates are not available as Jumbo Certificates.

After 90 days from Member’s Choice Certificate opening date, members may request a change to current dividend rate applicable to that Certificate term. Future rate changes may be requested every 365 days after the last rate change to Certificate. RFCU cannot guarantee future increases of Certificate rates. Rate change request must be initiated by the member, either in writing or by telephone call.

Regular Share Certificates: Minimum balance required to open and maintain a regular Certificate account and to earn dividends is $1,000. Minimum balance required to open and maintain a jumbo Certificate account and to earn dividends is $100,000.

Refer to the Rates web page and the Share Certificate Account Rate Sheet for current dividend rates and APYs.