What is a credit union share draft account? Is it a checking account? | Consumer Financial Protection Bureau (2024)

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What is a credit union share draft account? Is it a checking account? | Consumer Financial Protection Bureau? ›

Credit unions refer to checking accounts as share draft accounts. While it might not affect how you use the account, share draft accounts are a form of ownership. This means you are a partial owner of the credit union, while checking account owners are customers of banks.

A share-draft account is a credit union account that is similar to a bank's checking account, except it is equivalent to buying a share in the credit union. Share-draft accounts do not have minimum balance requirements or charge account maintenance fees. They also earn interest, compounded on a quarterly basis.

Credit unions are membership organizations in which each member owns a share. A share account represents an individual's ownership in the credit union. Share accounts can be savings accounts or checking accounts. You may also hear credit union checking accounts referred to as share draft accounts.

Credit unions, traditional banks, and other types of financial institutions all offer many different types of checking accounts, such as classic checking and rewards checking. While classic checking accounts don't typically pay interest, some rewards checking accounts do.

Credit union accounts. A credit union provides loans, savings, bank accounts and other services to their members. They are designed to help the community rather than make money, often accepting people who've been turned down for accounts and loans elsewhere.

Share draft accounts earn interest — often called dividends, at credit unions — while most bank checking accounts do not. The not-for-profit nature of credit unions means that all profits are distributed to members in the form of dividends.

The term "bank draft" (also called a banker's draft, bank check, or teller's check) is a paper document that resembles a traditional paper check. But unlike personal checks, a draft is guaranteed by the issuing bank, with no chance that the check could bounce.

Members can withdraw shares at any point, provided they are not pledged as security for a loan.

In a credit union, every member is also a part owner. Because credit unions are co-operatively owned, members' deposits are treated as shares. Shares do not earn interest, but instead, earn dividends. When a member opens a credit union account, unlike a bank, they are given a minimum of two (2) share accounts.

A share secured loan lets you borrow money using your savings account balance as collateral. The financial institution “freezes” the amount you'd like to borrow. While that amount won't be available for withdrawal, it will remain in your account and continue to earn dividends.

Can you use a credit union like a bank account? ›

Credit unions are not-for-profit financial institutions owned by their members. They provide many of the same products and services as banks including checking and savings accounts as well as various loan products and investment accounts like IRAs.

Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.

Credit unions refer to checking accounts as share draft accounts. While it might not affect how you use the account, share draft accounts are a form of ownership.

Traditional or Regular Savings Account

These are the savings accounts you typically find at traditional banks or credit unions. These types of savings accounts generally allow you to earn interest on your money, although they usually pay lower rates than other savings products.

Banks are typically for-profit entities owned by shareholders who expect to earn dividends. Credit unions, on the other hand, are not-for-profit, member-owned cooperatives that are committed to the financial success of the individuals, families, and communities they serve.

How Does a Brokerage Account Differ From a Bank Account? Brokerage accounts hold securities such as stocks, bonds, and mutual funds and some cash. A bank account only holds cash deposits.

A joint account functions like a standard account, such as a checking or savings account, and allows anyone named on the account to access its funds. All owners can withdraw cash, write checks, and make online payments.

A bank draft is a payment that is guaranteed by the issuing bank. Bank drafts are often used for larger payments such as a down payment on a home. Banks verify and withdraw funds from the payer's account and deposit them into an internal account, or a reserve account.

Unlike an e-transfer, a bank draft does not have a maximum amount limit and does not require the banking information of the payee. Thus, bank drafts are commonly used when making large purchases, such as buying a house or car.