A share draft account or simply a share draft is a checking account that’s held at a credit union. Share draft accounts are similar to checking accounts offered by banks in terms of how you can use them.
There are, however, a few differences that set them apart. Whether a share draft account or a checking account is right for you can depend on your preferences for managing your money. If you’re thinking of opening a share draft at your local credit union, it helps to know more about how they work.
What Is a Share Draft Account?
The term “share draft account” is how credit unions refer to what banks call checking accounts. This terminology reflects in part how credit unions work.
When you join a credit union, you become a member of it. You, along with the other members, have an ownership share in the credit union. That’s a key distinction between a credit union vs. bank. Share draft is used to describe checking accounts belonging to credit union members.
You’ll also see the word “share” used with other types of accounts offered at credit unions. For example, a share account is the credit union equivalent of a bank savings account. These accounts can earn interest so you can grow your money over time.
Share certificates, meanwhile, are the credit union version of certificate of deposit (CD) accounts. You deposit money into a share certificate, which then earns interest until the certificate matures. At maturity, you can withdraw the initial deposit and interest earned or roll it into a new share certificate.
How Do Share Draft Accounts Work?
Share draft accounts work by allowing you to deposit money that you can then spend or withdraw later. Each time you deposit money, you’re essentially buying shares in the credit union that holds your account.
Generally, with a share draft account you can:
• Pay bills online
• Withdraw cash at ATMs (though there may be ATM withdrawal limits)
• Make purchases online or in person using a linked debit card
• Manage accounts via online and mobile banking
• Add funds through direct deposit and/or remote deposit capture
• Write checks
• Link your debit card to mobile wallet apps
• Send money to friends and family through Zelle or another mobile payment app
• Send and receive ACH transfers or wire transfers
There may be various fees associated with these accounts, including monthly maintenance fees or overdraft fees. You may also pay ATM fees, depending on where you withdraw cash. Some share draft accounts pay dividends to credit union members as they’re declared quarterly, biannually, or annually.
Opening a share draft account is a bit different from opening a bank account. You first need to qualify for membership in a credit union.
The qualification requirements can vary by credit union. In terms of how much money to open an account, initial deposit requirements are usually on the lower side. It might be, say, $5 to $25 in many cases.
Credit unions can impose daily, weekly, and monthly limits on debit card transactions and ATM withdrawals. There may also be limits on check writing. Customer service availability can depend on the credit union.
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Pros of Share Draft Accounts
There’s a lot to like about share draft accounts and credit unions in general. Here are some of the main advantages of share draft accounts:
• Initial deposit requirements are often low
• Minimum balance requirements may be low or nonexistent
• Some share draft accounts can earn dividends
• Banking fees may be lower
• Benefits and features tend to be similar to bank checking accounts
• Credit unions can offer numerous ways to access share draft accounts, including online and mobile banking, ATMs, and branches.
There’s one more advantage to opening a share draft account. If you’re a member of a shared branch credit union, you can access your money through a wider network of branches. Shared branch banking means that even if your accounts are held at, for example, Credit Union A, you could access them at Credit Union B, which is convenient if you’re traveling.
Get up to $300 with eligible direct deposit when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 3.80% APY on savings balances.
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Up to $3M of additional FDIC insurance.
Cons of Share Draft Accounts
Share draft accounts may not be right for everyone. Before opening one, here are a few potential drawbacks to keep in mind:
• Membership in a credit union is required to open a share draft account
• Branch access may be limited if your credit union isn’t part of a shared branch network
• There may be limits on withdrawals or debit card transactions
• Dividend rates may be low.
Qualifying for membership in a credit union might be the biggest hurdle to joining one for some people. Credit unions can base membership on things like military affiliation, where you work or attend school, or religious affiliation. The good news is that there are some credit unions that have less stringent requirements and offer membership to a wider range of people. It can be worthwhile to shop around.
How Does a Share Draft Differ From a Traditional Bank Account?
Share draft accounts are similar to checking accounts offered at traditional banks, but they aren’t identical. Here are some of the most important differences between share draft vs.checking accounts.
Fees
Banks are known for often charging plenty of fees for checking accounts. Fees are a big part of how banks make a profit. Credit unions, on the other hand, are not-for-profit financial institutions. That means they generally charge their members fewer fees and can pay higher interest rates on deposit accounts than traditional banks.
Deposit Insurance
Deposits at banks and credit unions can both be insured against institutional failure. Whether your coverage comes through the FDIC vs. NCUA depends on where you keep your accounts. Credit unions are likely insured by NCUA, or the National Credit Union Administration.
• The Federal Deposit Insurance Corporation (FDIC) insures deposits for up to $250,000 per depositor, per account ownership category, per insured financial institution. You may qualify for more deposit insurance if you have accounts in different ownership categories that meet FDIC requirements. This insurance reassures you that your checking account is safe.
• The National Credit Union Administration insures deposits at member credit unions up to $250,000 per depositor, per insured credit union. Member deposits held in jointly-owned accounts are insured up to $250,000 as well.
Features and Benefits
Credit unions and banks can offer a different range of features and benefits for draft accounts and checking accounts, respectively. There can be a significant difference between what is a premium checking account at a bank and what constitutes a premium share draft account at a credit union, for example. Comparing what’s included with share draft and checking accounts can help you decide which one is better for your needs.
The Takeaway
Deciding to open a checking account or a share draft account can help you get a better handle on your money. Both share draft accounts and checking accounts make it easy to deposit funds, pay bills, withdraw cash, or make purchases as needed. Share draft accounts are held at credit unions, and they may have lower fees and minimum deposit and balance requirements. That said, they may lack accessibility vs., some banks.
If you’d like to manage your money at an online bank, consider what SoFi offers.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What is the difference between regular share and share draft?
A share account is a savings account held at a credit union. Share accounts can earn interest in the form of dividends. Share draft accounts, however, are similar to a checking account and allow you to make draft withdrawals by writing checks, making purchases with a debit card, or withdrawing cash at ATMs.
What is the difference between a share draft and a checking account?
The difference between a share draft and a checking account is where they’re held. Share draft accounts are offered at credit unions; checking accounts are offered at banks. Share draft accounts can be NCUA-insured while checking accounts at banks have FDIC deposit insurance coverage.
Is a checking account better than a share draft?
A checking account may be preferable to a share draft account if you’d rather keep your money at a bank rather than a credit union. On the other hand, you might lean toward a share draft if you’d rather take advantage of perks that only a credit union may offer. Looking at your money management habits and preferences can help you decide whether a checking account or share draft is the better fit.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
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