Choosing the best way to save can make a big difference in how quickly your money grows. This article compares money market share accounts and term share certificates, two higher-yield deposit options that can help you achieve your savings goals. We'll explore their features, including dividends, flexibility, and minimum balance requirements, to help you choose the one that best suits your financial needs.

What Is a Term Share Certificate?

A term share certificate is a type of high-yield account offered by credit unions that works similarly to a certificate of deposit (CD) offered by banks. Here are the key differences:

  • Term share certificates are available at credit unions, while CDs are available at banks.
  • Term share certificates are insured by the National Credit Union Administration (NCUA), while CDs are insured by the Federal Deposit Insurance Corporation (FDIC).

To open a term share certificate, you select a term and deposit the desired amount of money into the account. Typical minimum deposit requirements may vary and once the share term starts, you cannot access any funds until the term ends. During the term, you will receive dividends on your money, which is similar to the interest you would accrue on a CD.

When your share certificate term ends, you can roll the funds into another certificate, transfer it into a different account, or withdraw the money. 

Benefits of a Term Share Certificate

Term share certificates offer several advantages, including:

  • Higher Earnings Potential. Term share certificates yield higher dividend rates than traditional savings accounts, allowing your money to grow faster.
  • Multiple Term Options. Most credit unions offer multiple term lengths ranging from a few months to several years. The longer the term, the higher the dividend rate may be. 
  • Guaranteed Return. Fixed rates in term share certificates guarantee returns for the term of the certificate. 
  • Safe Investments. Term share certificates are insured for up to $250,000 per depositor by the National Credit Union Administration (NCUA), providing peace of mind for your money.

What Is a Money Market Share Account?

A money market share account (MMSA) is a high-yield deposit account offered by banks and credit unions. It includes features of both savings and checking accounts for convenience, but typically provides higher dividends. An MMSA offers greater flexibility and can be used for just about anything from short-term savings to emergency funds.

Benefits of a Money Market Share Account

The benefits of a money market share account make it a convenient and attractive option for managing your savings.

  • High Dividends. Provide higher dividend rates than traditional deposit accounts, allowing your money to grow faster.
  • Convenience. Unlike term share certificates, which hold your funds for a set time, money market accounts allow greater flexibility when accessing your money. 
  • Insurance. Money market share accounts are covered by NCUA insurance with a guaranteed amount of coverage up to $250,000 per depositor.

Money Market Share Account vs. Term Share Certificate: Which Is Right for You?

Both money market share accounts (MMSAs) and term share certificates offer the potential for higher returns than more traditional deposit accounts, but they have distinct features that make them suitable for different financial goals.

Dividends

  • Money Market Share Accounts: Generally offer competitive dividend rates that fluctuate with market conditions.
  • Term Share Certificates: Typically offer higher dividend rates than money market share accounts, especially for longer terms.

Flexibility

  • Money Market Share Accounts:Offer greater flexibility with limited restrictions on withdrawals.
  • Term Share Certificates: Have limited flexibility. Withdrawing funds before the term ends typically results in penalties, such as a loss of dividends or a portion of the principal.

Access to Funds

  • Money Market Share Accounts: Provide convenient access to your funds through check writing and online banking.
  • Term Share Certificates: Funds are typically not accessible until the end of the term without a penalty.

Minimum Balance Requirements

  • Money Market Share Accounts: Usually require a higher minimum balance than share certificates.
  • Term Share Certificates: Generally have lower minimum deposit requirements, which can vary.

By carefully considering your finances, time horizon, and risk tolerance, you can determine whether a money market share account or a term share certificate is the best option.

Whether you're interested in a money market share account, a term share certificate, or exploring other ways to maximize your savings, HFCU can help. Contact us today to learn more about our high-yield accounts and schedule a consultation with a financial advisor to discuss your savings goals.