Share Certificate Accounts (SCAs) can be ideal vehicles for investing funds that you do not need in the near term. SCAs are promissory notes issued by credit unions. They are time deposits usually having maturities ranging from 30 days to as long as ten years. The most popular terms are from 90 days to five years. Since they are time deposits, usually offer higher interest rates than savings accounts, but they have penalties (often 90 days of interest) for early withdrawals.
SCAs of less than $100,000 are usually called regular (or small) SCAs and those over $100,000 are referred to as jumbo SCAs. Jumbo SCAs often pay slightly higher interest rates than regular SCAs. In addition, SCAs with longer maturities usually pay higher rates. Visit our rates page to see examples of how longer maturities offer higher rates.
When choosing the maturity of a SCA to buy, it is important to consider your liquidity needs and that interest rates will change over time. Buying a five year SCA with a 2.95% rate may be attractive today, but if rates rise in the next couple of years, you are locked into that 2.95% rate until maturity.
An alternative is to use a "laddering of maturities" strategy. For example, instead of buying one five year SCA, buy equal amounts of one, two, three, four and five year SCAs. As each SCA matures, you then reinvest the proceeds into a five year SCA. While you would not have as high of an initial rate, over time all your funds would end up in higher rate five year SCAs and you would have annual liquidity of one fifth of your funds. If rates rise, you would take advantage of the higher rates with new purchases. If rates fall, you still have the initial higher rate SCAs that you already own.
SCAs offered by credit unions are insured up to $250,000 by the National Credit Union Share Insurance Funds that is an arm of the National Credit Union Administration (NCUA). There are ownership rules applied to determining the insurance limit and you should thoroughly investigate these rules if you are considering having over $250,000 with a single institution.