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Why Is It a Share Account Instead of a Savings Account?

What you'll learn: The differences between share and savings accounts


While credit unions and banks perform many of the same financial functions, terminology surrounding the two can be quite different.

For example, credit unions serve the needs of their members while banks talk about their account holders — or simply their customers. Credit unions also use different names for the accounts they offer. For example, credit union members have share accounts while bank customers have checking and savings accounts.

If you’ve ever wondered what a credit union share account is and why each institution describes such similar services so differently, we’re here to unravel the mystery and explain why it matters.

What Is a Share Account at a Credit Union?

Credit union members have “share draft accounts” and “share accounts” while bank customers have “checking” and “savings accounts,” but there’s virtually no difference in how these accounts serve you in your daily life.

The difference is in what these accounts represent. When you put your money in a bank, you’re a customer with no actual interest in the bank’s survival as an institution beyond the services you pay for with fees, but when you join a credit union, you’re actually becoming a partial owner in the organization. That’s because credit unions are owned and operated by their members (who together elect a volunteer Board of Directors that runs the organization).

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An online-only savings account could earn you more than a regular savings account.

Why It Matters What You Call a Share Account

Why don’t credit unions keep things simple with just “checking” and “savings”? Since credit union members hold a financial stake in the union, the “share” in question is your financial share in the organization.

So, your savings account represents your share of the credit union, thus it’s called a “share account” (or sometimes a share savings account). Checking accounts at a credit union are called “draft share accounts” because they’re share accounts you can draft checks from. Nowadays you can also make purchases with debit cards linked to your share draft account and even take advantage of online banking.

Credit unions operate using their members’ money and return any profits they make to their members.

It may seem like a minor detail, but the language difference between credit unions and banks serves to remind you of the key difference between the two: credit unions exist to serve their members (that’s you!), while banks exist to serve their shareholders (not you).

Bank Shareholders vs. Credit Union Shareholders (Members)

Banks are run by outside shareholders (also called stockholders) who invest large amounts of money in the bank. While shareholders may make decisions that benefit bank customers, their main goal is for the bank to make money. After all, when the bank makes money, the shareholders split those profits.

In contrast, credit union members occupy both roles — the customer and the shareholder. This means they maintain personal accounts with the credit union and they also have the right to vote on decisions that shape the institution. They can elect members of the volunteer board of directors who make day-to-day decisions, and when the credit union turns a profit, that money is returned to the credit union’s members.

Interest vs. Dividends

Instead of interest, a credit union share account (where you keep your savings) earns you dividends. So, the same way a share account reflects your ownership in your credit union, the word “dividend” reflects that you’ve earned a portion of the credit union’s profits.

As cooperatives, credit unions seek ways to make life better for their members.

The Benefits of Being a Credit Union Shareholder

The main benefit of belonging to a credit union is that you, as a shareholder, can influence the organization’s decisions. Through voting, you can help elect leadership that reflects your values. But there are many other benefits, too.

One appealing feature of credit unions is that they operate using their members’ money and return any profits they make to their members. This happens through:

  • Lower interest rates on loans and credit cards
  • Higher dividends (interest rates) on savings accounts
  • Dividends on checking accounts
  • Fewer (and often lower) fees

It’s not as hard as you might think — read our step-by-step guide to making the switch from bank to credit union.

But the benefits of credit union membership don’t stop there. As cooperatives, credit unions seek ways to make life better for their members, both financially and in other areas of members’ lives. As a credit union member, you can look forward to:

  • Financial education (including classes, workshops, and financial counseling)
  • Membership discounts and savings
  • Greater community investment
  • Unwavering commitment to you and other members

The Takeaway

Even though they serve you in just about the same way, the difference between credit union share accounts and bank savings accounts goes far beyond branding. Credit unions use different language to remind you of the role you play in being a member, which is great because being a member of a credit union has a lot of benefits.

Learn More About Becoming a Credit Union Member 

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