CD to money market certificate
What is the difference between a certificate of deposit and the
money market certificate offered by my credit union?
-- Paul Parallels
Credit unions are financial institutions that are owned by their
depositors, not by stockholders. What are called "deposits"
at banks are called "shares" at credit unions and these
shares earn dividends, not interest.
Shares insured by the National Credit Union Share
Insurance Fund, or NCUSIF, are backed by the full faith and credit
of the United States government, just like FDIC-insured deposits
held at a bank.
A money market instrument is a debt security with
a final maturity of a year or less. In contrast, a certificate of
deposit, or CD, can have many different maturities. Bankrate tracks
CD maturities ranging from three months to five years and includes
credit union offerings in the mix.
Bankrate defines a share certificate as "a certificate
of deposit issued by a credit union that pays a specific dividend
if held for a specific period. It's the credit union equivalent
of a certificate of deposit. A penalty is usually assessed if all
or any of the principal is withdrawn before maturity."
So, the money market certificate offered by
your credit union is a term investment with a final maturity of
less than a year. It's comparable to bank CDs with final maturities
of less than one year.