What Is a Share-Draft Account?

A share-draft account is a version of a checking account, except it is offered by a 澳洲幸运5官方开奖结果体彩网:credit union instead o🃏f a bank. In order to understand what a ෴share-draft account is, it is first important to know the difference between a bank and a credit union.

Banks are businesses that exist to make a profit from offering financial products, such as loans, savings and checking accounts, 澳洲幸运5官方开奖结果体彩网:certificates of deposit (CDs), and credit cards, to consumers. Credit unions are financial institutions that are owned jointly by all members or account holders. They do not exist to make a profit but rather to benefit the account holders. When you deposit money into a credit union ♕share-draft account, you're technically buying shares in that credit union.

Understanding a Share-Draft Account

A share-draft account refers to a credit union account that is similar to a bank's checking account. Share-draft accounts were created under the Consumer Checking Account Equity Act of 1979.

Share-draft accounts allow credit union members to access their share balances by writing drafts on their accounts. Share-draft accounts allow for an unlimited number of checks to be written, and one of their primary benefits is that they are secured with federal insurance by the 澳洲幸运5官方开奖结果体彩网:National Credit Union Administra💦tion (NCUA).

Insurance for bank deposits is provided by the 澳洲幸运5官方开奖结果体彩网:Federal Dep💝osit Insurance Corporation (FDIC). Both NCUA and FDIC deposits are ensured for up to $250,00 per individual. Bank deposits are insured to prevent 澳洲幸运5官方开奖结果体彩网:bank runs in the event that a bank fails.

Interest earned on share-draft accounts is compounded quarterly. These accounts are similar to 澳洲幸运5官方开奖结果体彩网:negotiable order of withdrawal (NOW) accounts, which are basically interest-bearing savings accoun𒊎ts against which drafts can be written. However, share-draft accounts are offered by credit unions, whereas NOW accounts are bank products.

In practice, a share-draft account operates almost exactly like a checking account. Account holders can write unlimited checks against the account, and credi🎃t unions typically issue debit cards that can be used to make purchases and withdrawals using the shares in the accounts.

Account holders can use their debit cards to make 澳洲幸运5官方开奖结果体彩网:point-of-sale (POS) purchases, withdraw money from ATMs, or shop online. Account holders can also go into a credit union branch to deposit or with🔥draw money from a share-draft account.

Share-Draft Accounts vs. Checking Accounts

A key difference between share-draft accounts and many checking accounts is that the former earns interest. Credit unions pay interest and 澳洲幸运5官方开奖结果体彩网:dividends on shares held by account holders, so the money deposited into a credit union earns dividends and interest that 🍌is compounded quarterly.

Between 1933 and 2011 in the U.S., demand deposit checking accounts were not allowed to earn interest. Now that the prohibition on꧃ demand deposit interest has been lifted, some bank checking accounts offer interest. Conversely, bank checking accounts often come with savings accounts associated with them, almost as one account, where deposits can🅠 earn interest.

Another key difference between share-draft accoun𝓡ts and checking accounts is that many banks require a monthly minimum balance or charge monthly fees for the maintenance of a checking account.

Credit unions do not charge their members any monthly fees or require 澳洲幸运5官方开奖结果体彩网:minimum balances in𒈔 share-draft accounts, or at the most, low fees. This makes them an attractive option for consumers looking to avoid paying fees or h👍aving to maintain minimum balances, especially now that many credit unions have opened their doors to the general public.

Overall, credit unions provide many benefits over banks, seen through better interest rates on deposit and savings accounts, 澳洲幸运5官方开奖结果体彩网:mortgages, and🐬 certificates of deposit (CDs), and the aforementioned low or no-fee ꧂accounts.