A regular share account at a credit union is the basic savings account that also functions as your proof of membership. Federal law requires every credit union member to hold at least one share in the institution, and that share sits in this account.1GovInfo. Federal Credit Union Act – Section 109 The deposit is usually small, often between $5 and $25, but without it you’re not a member and can’t borrow, vote, or use any other product the credit union offers.
Why It’s Called a Share
Credit unions are cooperatives, not corporations. When you deposit money into a regular share account, you’re purchasing an ownership stake. The Federal Credit Union Act puts it plainly: every person elected to membership must “subscribe to at least one share of its stock and pay the initial installment thereon.”1GovInfo. Federal Credit Union Act – Section 109 That one share is what separates a credit union member from a bank customer.
The dollar amount of the required share is called the par value, and each credit union’s board of directors sets it.2GovInfo. 12 USC 1761b – Powers of Board of Directors That minimum stays locked in your account for as long as you remain a member. Anything you deposit above it is yours to move freely.
Because each member holds a share, each member gets one vote on the board and major policy decisions, regardless of how much money is on deposit. Joint account holders don’t automatically get voting rights; they need to independently qualify for membership.1GovInfo. Federal Credit Union Act – Section 109
You also have to be eligible to join in the first place. Each credit union has a defined field of membership tied to an employer, an organization, or a geographic area.3National Credit Union Administration. Field-of-Membership Expansion Confirm you qualify before you try to open the account.
How the Account Works Day to Day
Functionally, a regular share account behaves like a savings account at a bank, with one vocabulary difference: credit unions pay dividends rather than interest. Because you’re part-owner of the cooperative, your earnings are technically your share of the institution’s surplus revenue. The board sets dividend rates periodically, and earnings are usually calculated on the average daily balance.
The old federal rule capping savings accounts at six outgoing transfers per month no longer exists. The Federal Reserve deleted that limit from Regulation D in April 2020, amending the definition of “savings deposit” to allow transfers “regardless of the number of such transfers and withdrawals or the manner in which such transfers and withdrawals are made.”4eCFR. 12 CFR 204.2 – Definitions Individual credit unions can still set their own transaction limits or fees, though, and many kept some version of the old restrictions. Read your account agreement.
Share Account vs. Share Draft Account
The regular share account is for saving. The share draft account is the credit union’s version of a checking account, built for spending: bill payments, direct deposits, debit card purchases, checks. There’s no cap on how many transactions run through it. A regular share account, by contrast, is where you park money you don’t need this week, and it typically earns a higher dividend rate because the funds sit still longer.
Only the regular share account is required for membership. You could be a credit union member for decades without ever opening a share draft account. But you cannot hold a share draft account, auto loan, or credit card at the credit union without first opening and maintaining that regular share account.
Is Your Money Insured
Yes, if the credit union is federally insured. The National Credit Union Share Insurance Fund, administered by the NCUA and backed by the full faith and credit of the United States, reimburses your balance dollar-for-dollar up to the coverage limit if the credit union fails, including any posted dividends.5MyCreditUnion.gov. How Does Share Insurance Work
Coverage maxes out at $250,000 per member per insured credit union, broken down by ownership category:
- Single ownership accounts: $250,000 per member
- Joint ownership accounts: $250,000 per co-owner
- IRAs and certain retirement accounts: $250,000 per member
- Revocable trust accounts: $250,000 per eligible beneficiary, subject to specific requirements
These limits apply separately within each category, so a member with both a single ownership account and an IRA at the same credit union has up to $500,000 in total coverage.6National Credit Union Administration. Share Insurance Coverage The insurance covers regular share accounts, share draft accounts, money market accounts, and share certificates alike.
How Dividends Are Taxed
Despite the name, earnings on your regular share account are taxed as ordinary interest income. The IRS is explicit: “certain distributions, commonly referred to as dividends, are actually taxable interest,” and credit union share accounts are specifically named.7Internal Revenue Service. Topic No. 403 – Interest Received You report the earnings the same way you’d report interest from a bank savings account.
If your credit union pays you $10 or more in dividends during the year, it must send you a Form 1099-INT.8Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID Even if you earn less than $10 and don’t receive a form, you’re still required to report the income. On a modest balance you may never hit the threshold, but it’s worth tracking if the account gets larger.
What Happens if You Stop Using the Account or Close It
If you let the account sit untouched, the credit union will eventually classify it as dormant. Most institutions charge a monthly dormancy fee once the account crosses the inactivity threshold, and those fees can eat into the par value of your membership share. Credit unions are permitted to charge dormant account fees even if doing so draws the balance to zero.9National Credit Union Administration. Membership Shares and Escheat
When the balance drops below the par value of one share, the credit union can give you a notice period (at least six months under standard federal credit union bylaws) to bring the account back up. If you don’t, membership can be terminated. State unclaimed property timelines vary, but dormancy periods for financial accounts generally run three to five years, after which the remaining funds must be turned over to the state.
Voluntarily closing the account is simpler but carries a consequence people overlook: withdrawing all your shares immediately ends your membership.10National Credit Union Administration. Bylaws on Terminating Membership Closing the account doesn’t erase any loans or credit cards you still have with the credit union, but it does end the membership relationship. Before you close it, move your direct deposits and automatic payments elsewhere. And if there’s any chance you’ll want to come back, leaving the par value in the account is far easier than reapplying for membership later.