A Guide to Share Term Certificates and Investing

A share term certificate is a type of investment that's often misunderstood. It's actually a simple and safe way to earn a fixed return on your money.

In a share term certificate, you deposit a sum of money with a bank or financial institution for a fixed period, usually ranging from a few months to several years. This period is called the term.

By investing in a share term certificate, you can expect to earn a fixed interest rate, which is usually higher than a traditional savings account. This interest rate is fixed from the start and remains the same throughout the term.

The interest rate on a share term certificate can vary depending on the institution and the term length, but it's generally higher than what you'd earn in a savings account.

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A share term certificate is a type of low-risk, fixed-term investment offered by credit unions. It requires you to deposit a specific amount of money for a predetermined period, ranging from a few months to a few years.

You can earn higher dividends with a share term certificate compared to regular savings accounts. The dividends are fixed for the term of the certificate, so you know exactly how much interest you'll earn.

Federally insured share term certificates offer an added layer of protection, with the National Credit Union Administration (NCUA) insuring deposits up to $250,000.

Here are some benefits of a share term certificate:

A share term certificate can be a great investment option for those looking for a low-risk way to grow their savings. It offers a fixed return on your investment, providing a level of security that's particularly reassuring in uncertain economic times.

One of the most appealing advantages of short-term share certificates is the relatively low risk. Unlike stocks or mutual funds, share certificates offer a fixed return on your investment, providing a level of security that is particularly reassuring in uncertain economic times.

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You can lock in a rate for a set period of time, which can be beneficial if you like a rate and want to avoid potential rate fluctuations. This is especially true if interest rates are rising, as you can reinvest at potentially higher rates more frequently.

Term Share Certificates (or CDs) offer a variety of terms between six months and five years, allowing you to create both short- and long-term goals. You can open multiple Term Share Certificates (or CDs) each at different terms, allowing you to diversify your earning potential with different balances and at different interest rates.

A share term certificate can be a great way to create smart savings habits by deterring you from accessing your money before the maturity date. This can help you develop a disciplined approach to saving and investing.

Here are some key benefits of share term certificates:

The fixed dividend rate associated with short-term share certificates can be particularly advantageous in a rising dividend rate environment. While longer-term certificates might lock in a lower rate for an extended period, short-term certificates allow you to reinvest at potentially higher rates more frequently.

By investing in a share term certificate, you can rest assured knowing your money will generate guaranteed returns. This can be especially appealing for those who are risk-averse or looking to preserve their capital.

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You can invest in STCs through a few different channels. You can open an STC directly with a credit union or bank, and they'll guide you through the process. This is often the most straightforward way to invest.

To open an STC, you'll need to deposit a minimum of $250, which is the same for all terms. You can choose from a range of terms, from 6 to 60 months.

You can also buy an STC through a stockbroker, but be aware that you'll likely have to pay a fee or commission. With a brokered STC, you can sell it without penalty, but you may have to sell it for less than the principal you invested.

It's essential to compare rates for STCs to find the best option for your needs. Here's a comparison of rates for different terms:

You can also consider laddering your STCs to protect against interest rate fluctuations and provide a steady flow of interest income. This involves opening multiple STCs with different terms to create a staggered maturity schedule.

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You can earn a higher rate of interest on your savings if you deposit your funds for a fixed period of time in a Share Term Certificate (STC). This is because STCs offer higher interest rates compared to regular savings accounts.

STCs have term variety, allowing members to choose from regular STCs with 6- to 60-month terms or a series of laddered STCs with graduated maturity dates.

You can also choose to have your STC automatically renew at the end of the chosen term, which is convenient for those who don't want to worry about renewing their certificates.

Here are the different term options available for STCs:

Laddering your funds with a variety of term lengths protects against the risk of interest rate fluctuations and provides a reliable flow of interest income.

The principal can transfer at maturity to the interest transfer account or renew with the same term at the then-offered rate, giving you flexibility with your STC.

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Predictable Returns are a key benefit of Share Term Certificates. They offer a fixed dividend rate that's locked in for the term of the certificate, providing peace of mind and financial security.

The fixed rate is a significant advantage over other investment options, where returns can fluctuate with market conditions. This means you can rely on a predictable return on your investment, which is especially important for those looking to save for specific goals or expenses.

Short-term certificates, in particular, offer a great option for those who want to reinvest at potentially higher rates more frequently. This can help you maximize your returns over time, making short-term share certificates a smart choice for those looking to boost their savings efficiently.

Here are some key benefits of predictable returns with Share Term Certificates:

With Share Term Certificates, you can have confidence in your investment and plan for the future with predictable returns.

There is no monthly maintenance fee for STCs.

If you cancel your STC before the maturity date, you'll face an early withdrawal penalty of 90 days' interest on the principal, or all interest earned, whichever is less. This penalty applies unless you cancel during the seven-day grace period after renewal.

Canceling a laddered STC will leave the laddering structure incomplete.

The STC Account Grace Period is a seven-day window after the renewal date during which you can make one deposit, withdrawal, or cancel the STC without penalty.

You can choose to do nothing during this time, and the STC rate will display as the current regular Share Account rate.

As long as you don't cancel the STC, the interest will be recalculated using the STC rate effective on the renewal date.

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Canceling an STC before the maturity date can come with some consequences. There's an early withdrawal penalty of 90 days' interest on the principal, or all interest earned, whichever is less.

If you're planning to cancel your STC, it's essential to know that there's a grace period of seven days after renewal. During this time, you won't incur any penalties.

Canceling a laddered STC will leave the laddering structure incomplete. This might impact your financial strategy, so it's worth considering the implications before making a decision.

You can avoid the penalty by waiting until after the grace period to cancel your STC. This is a good option if you need to access your funds but can wait a short time.

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You can use your STC funds as collateral on SECU loans, but not on loans at other financial institutions.

Funds designated as collateral for a loan cannot be withdrawn until the loan is paid in full.

If you need to access your money sooner, a short-term share certificate is a good option, allowing you to access your funds more frequently compared to a long-term share certificate.

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STC funds can be used as collateral on SECU loans only. This means you can leverage your STC funds to secure a loan from SECU, but you won't be able to use them as collateral for loans at other financial institutions.

If you designate your STC funds as collateral for a loan, you won't be able to withdraw them until the loan is paid in full. This is an important consideration to keep in mind when deciding whether to use your STC funds as loan collateral.

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You can access your money sooner with a short-term share certificate compared to a long-term one. This is because short-term share certificates have shorter commitment times.

With a short-term share certificate, you can select a timeframe that aligns with your financial objectives, such as a vacation or a down payment on a car. This allows you to tailor your investment to your specific needs.

You can withdraw or add money more often with a short-term share certificate, unlike a long-term share certificate with a 60-month term. This gives you more flexibility in building your savings.

You won't have to worry about incurring an early withdrawal penalty, saving you the hassle.

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Money Market Accounts can be a great option for those who want flexible access to their cash. You can deposit and withdraw funds at any time, as long as your balance stays above $250 to avoid a monthly maintenance fee.

The annual percentage yield for Money Market Accounts is currently 2.02%. This is lower than what you'd earn with a Share Term Certificate, but the flexibility is a big plus.

Be aware that some Money Market Accounts may have minimum balance requirements, but at least one option we looked at has no minimum balance requirement.

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