What is a share certificate account?

A share certificate account, also known as a CD (certificate of deposit) account, is a type of savings account offered by banks and credit unions. It requires a minimum deposit which is locked in for a fixed term, typically anywhere from three months to five years, during which the account holder earns a fixed interest rate.

Share certificate accounts are considered low-risk investments as they are insured by the FDIC (Federal Deposit Insurance Corporation) for up to $250,000 per account. However, they offer lower returns compared to other investment options such as stocks or mutual funds.

Withdrawals before the maturity date usually incur a penalty, but once the term ends, the account holder can opt to roll over the investment, deposit the money into another account, or withdraw the funds altogether.

Share certificate accounts are a useful option for individuals who want to earn a guaranteed rate of return on their savings without the volatility of other investment options.