Share Certificates are to Credit Unions as Certificates of Deposit are to banks. They’re an important piece of a solid financial portfolio giving you the opportunity to maximize your money with a higher return within in a set term.
To better understand how Share Certificates work, take a look at a few terms associated with these accounts.
1. Maturity Date
The maturity date of a certificate is the date in which the term ends, allowing you to renew the certificate or withdraw funds and any earnings gained. Certificates can have term length anywhere from a few months to several years.
If you open an 18-month certificate, it will reach its maturity date 18 months after it’s opened, and you can withdraw funds (and dividends) penalty-free or redeposit the funds into a new certificate.
A common strategy to increase earnings and maintain liquidity is certificate laddering. If you don’t need your funds at the time of maturity, reinvest into a longer-term certificate. You may get the benefits of better interest rates with the assurance that you can access some of your money periodically, if needed.
For example, rather than putting $3,000 into a single 3-year certificate, you might put $1,000 in a 1-year, 2-year, and 3-yeear certificate. When the first certificate matures, you can reinvest it in a 3-year certificate and repeat the same process with the other certificates as they mature. This provides you regular access to your funds in case you need them while still taking advantage of higher returns.
3. Early Withdrawal Penalty
Most certificates have a penalty for withdrawing funds before its maturity date. While it’s not advised to withdrawal before maturity, life happens and the need for money may arise. By understanding the terms of your certificate and taking advantage of certificate laddering, you can hopefully avoid these situations.
General Electric Credit Union offers a wide variety of share certificate terms with industry-leading rates. Share certificates offer guaranteed returns at a steady rate. Learn more on how you can reach your savings goals.
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