Can I cash a share account at a Federal Credit Union?

Question

What is a share account? I keep getting a note every quarter from a FCU that names a quantity of shares, not dollars. What does this mean, and can I cash these shares? If yes, what do I need to do and how long will it take?

Answer 1

When dealing with a credit Union in the United States you will frequently see the word share. That is because you are not just a customer, but a member and part owner of the credit union. The law requires that you own a share. In the three credit unions I have been a member of, every member owns a share, and a share costs 5 dollars.

The share is represented in the balance of the share savings account. Your available balance is always $5 less than the total balance.

The credit unions I am familiar with use the following terms:

• Share account or share savings account for a savings account.
• Share draft for a checking account.
• Share certificate for a Certificate of Deposit or CD.

The only way to sell your share, is to empty all your accounts, cancel any credit card you have with the credit union, and pay off any loans. Then you can sell the share back for the same $5. Remember the credit union is non-profit, so the share price should never change. As long as you own that share you can vote in the member meetings, and vote for the board.

Answer 2

The answer by mhoran_psprep is correct - credit unions are owned by their members, and that ownership stake is represented as a share account. In fact, any depository account is treated as ownership, there is no actual concept of a savings account at a credit union - depository accounts automatically represent an ownership share of the company, so the product that a traditional bank calls a savings account gets called a share account at a credit union.

I'm adding an additional answer to clarify a few additional points that can lead to confusion over terminology.

Credit unions require you to own a share in order to use them as a financial institution. Even if you have no intention of using a deposit account at a credit union, you must have a share account (an ownership in the credit union) in order to use any other services or products. The share account will have a minimum balance amount, referred to as par, and it's often in the range of $1 - $5 (but sometimes is as high as $20 - 30). This is, of course, different from banks. You can walk into a consumer bank and get just a credit card, or just a mortgage. But you can't do that at a credit union - you need to get that product and a share account, in order to become a member.

So, for instance, if you go get a car loan at a credit union, you will not literally walk out with just a car loan - you'll walk out with a car loan and a share account.

This confuses people who aren't used to working with credit unions, because they don't understand where this other account came from or what it means. They may not even know it exists if they don't pay attention to the paperwork they're signing. These people will then, eventually, pay off their car loan, and they won't understand why they keep getting monthly statements from the credit union - as far as they're concerned, the loan is done, so they're not doing business there any more.

This confusion can be further compounded by the fact that many credit unions will basically donate the par amount into your share account, so new members don't even put their own $1 down as a deposit, it just appeared out of thin air! With the increased presence of online banking and indirect auto lending, many credit unions are getting a huge surge of membership from people with little prior exposure to how they operate, and with no direct human to human contact with an actual credit union employee who can explain what a share account is. Thus, over the last few years, there have been lots of people out there who are just as confused as you are!

To get to your actual questions,

What does this mean

Hopefully that's been well covered by now.

can I cash these shares?

Only if you have no other active accounts with the credit union, of any type.

If yes, what do I need to do and how long will it take?

Essentially, withdrawing the par amount from your share account terminates your relationship with the credit union. You can always join again in the future of course, at which point you'll be required to put down par once again into a new share account. However, from the practical perspective, all you need to do is close the account, at which time you'll be given the par deposit in cash or whatever other form you want. It shouldn't take long, just a few minutes of time with a teller - or, you may be able to do it in your credit union's online banking portal or via phone.

The par amount in your share account is, functionally, equivalent to having a savings account with a minimum balance at a traditional bank. They may be calling that amount shares but it's essentially cash-equivalent. You don't need to do anything special to sell them or cash them in.