Share Draft Account

A Share Draft Account is the credit union's clever answer to the traditional bank checking account. Think of it as a checking account with an ownership twist. When you open a share draft account, you're not just a customer; you become a member-owner of the not-for-profit credit union. The money you deposit is technically considered your “share” of ownership in the institution. The “drafts” you write are the credit union's version of checks, allowing you to access and spend your funds just as you would with any other checking account. Functionally, it comes with a debit card, online access, and all the modern conveniences you'd expect. The key difference lies in the philosophy: instead of generating profits for outside stockholders, credit unions return their earnings to members through better rates and lower fees, making share draft accounts a compelling option for savvy savers.

Not in the way you think of stocks on the New York Stock Exchange. While your deposits are called “shares,” their value is stable. A dollar deposited is a dollar in your account, period. It doesn't fluctuate with the credit union's performance like a stock would. The term “share” is really a nod to the cooperative ownership structure. Every member owns a piece of the pie, so every deposit is a share in the collective. When you write a share draft or swipe your debit card, you are simply “redeeming” a portion of your shares for cash or a payment. It's a cash management tool, not a speculative investment. The real prize of this ownership model isn't capital appreciation, but the superior terms you get as a member-owner.

The fundamental difference is in their DNA. A share draft account lives at a credit union, while a checking account lives at a bank.

• Credit Unions: These are not-for-profit financial cooperatives. They are owned and controlled by their members—the people who bank there. Their mission is to serve their members, not to maximize profits for external shareholders.
• Banks: These are for-profit corporations. They are owned by investors (stockholders) and are legally obligated to maximize shareholder wealth. Customers use their services but do not have an ownership stake.

This is where the ownership model really pays off for members. Since credit unions return profits to their members, share draft accounts often feature:

• Lower Fees: Say goodbye to many of the pesky monthly maintenance fees, minimum balance requirements, and overdraft charges that are common at big banks.
• Higher Yields: Instead of earning interest, share draft accounts typically pay dividends. Functionally, it's the same—money earned on your balance. However, because credit unions don't have to pay outside stockholders, these dividends are often higher than the interest rates on comparable bank checking accounts.

Absolutely. This is a non-negotiable for any cash account. Your money in a federally insured credit union is just as safe as it is in a bank.

• Bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC).
• Credit union deposits are insured by the National Credit Union Administration (NCUA), another U.S. government agency. The NCUA provides the same level of protection: up to $250,000 per individual depositor, per insured institution, in the event the credit union fails. So, you can sleep soundly at night.

For a value investing enthusiast, every dollar counts. While a share draft account isn't an “investment” that will make you rich overnight, it's a cornerstone of smart cash management. Minimizing fees and maximizing the return on your cash—even by a fraction of a percent—is a value investor's bread and butter. It's about efficiency. Why pay a bank a monthly fee for holding your cash when a credit union will hold it for free and maybe even pay you a slightly higher dividend for the privilege? That money saved on fees is capital you can deploy into your actual investments. Think of a share draft account as the perfect home base for your portfolio's cash: safe, efficient, and working just a little bit harder for you, its owner.