A share savings account isn’t too different from a regular savings account, though there’s one major difference: You’ll find share savings accounts at credit unions, not banks.

In practice, share savings accounts and regular savings accounts work the same way. Both are insured deposit accounts that pay a return on your balance. But there are a few differences between the two that are worth understanding.

Continue reading to learn what share savings accounts are, how they work, and how they compare to traditional savings accounts.

What is a share savings account?

A share savings account is a savings account you open at a credit union.

Share savings accounts get their name from the organizational structure of a credit union. Credit unions are nonprofit financial cooperatives, and you must become a member to bank there. When you join a credit union, you must also open a share account.

Share savings accounts require an initial deposit — often around $5. This minimum deposit represents your “share” of credit union ownership. This differs from a regular savings account, which may require a minimum deposit but doesn’t grant partial ownership in exchange.

Credit unions can have share savings accounts, share checking accounts, and share certificates. When you become a member at a credit union, you’ll typically have to open whichever account the credit union designates as a share account.

How does a share savings account work?

When you join a credit union, you’ll make an initial deposit into your share savings account that represents your ownership in the institution. Like a regular savings account, you earn a return on your balance. At a credit union, these returns are known as dividends, which come from the credit union’s profits. Because credit unions return profits to their members, they can often afford to offer higher dividends than the interest rates offered by traditional banks.

Most share savings accounts don’t come with a debit card or ATM access. But you can likely open a checking account at the same credit union and link it to your share savings account, making it easy to transfer funds between the two.

Like a bank savings account, share savings accounts may have monthly maintenance fees. If so, there are often ways to avoid the fee, such as maintaining a specific minimum balance.

Most credit unions offer online and mobile banking so you can access and manage your account from anywhere. Credit unions are also unique in that they often participate in cooperative shared branch networks. This means if you’re traveling, you may be able to head into another credit union’s branch and access your share savings account with no additional fees.

Share savings accounts vs. bank savings accounts: Key differences

On the surface, share savings accounts and bank saving accounts work in a similar way and serve the same purpose. But these two account types have a few distinct features that set them apart:

• Financial institution structure: Share savings accounts are found at credit unions, while bank savings accounts are found at banks. When you open a share savings account, you become a shareholder of that credit union. No such ownership exists for most bank customers (the exception being mutual banks).

• Fees: Credit unions are nonprofit organizations, and banks operate for a profit. This generally allows credit unions to charge fewer and lower fees compared to banks.

• Earnings: Earnings on a bank savings account are known as interest. At a credit union, your share savings account earns dividends. Dividends are a share of the organization’s profits.

• Insurance: Because share savings accounts and bank savings accounts are held at different types of institutions, they’re insured by different entities. Share savings accounts are insured by the National Credit Union Administration (NCUA), while bank savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC).

Initial deposit: Share accounts require an initial deposit, or share, which is typically $5. This share is necessary for membership and gives the account holder partial ownership in the credit union. Minimum deposits for bank savings accounts, however, vary widely. Some accounts may require $100 or more initially, but there are plenty of banks that have no minimum deposit requirement.

Read more: Credit union vs. bank: Which is right for you?

Pros and cons of share savings accounts

Share savings accounts offer a wide range of advantages, but they may present some disadvantages, too. Weigh the following pros and cons before opening one:

Pros

• Low initial deposits: Opening share deposits are usually quite low, often $5. This makes them widely accessible to a range of savers.

• Credit union ownership: Opening a share savings account at a credit union means you become a shareholder, or owner, of the institution. This comes with a range of perks, including a say in how the credit union operates.

• Dividends: Share savings accounts pay you dividends on your balance. These dividends are often more than you’d earn with a traditional bank savings account.

• Low fees: Because credit unions aren’t focused on making a profit, they often can treat their members to low or no fees.

Cons

• Some banks have no minimum deposit: While a share opening deposit is an inherent part of a share savings account, some banks offer savings accounts with a $0 minimum opening deposit.

• May find better returns at online banks: Online banks, which don’t have to pay the overhead costs of maintaining physical branches, may be able to offer even higher returns on your savings.

• Must meet eligibility requirements to join a credit union: For the most part, anyone can open a bank account. But to open a share account at a credit union, you have to meet the organization’s eligibility requirements, which can be limiting.

How to open a share savings account

Opening a share savings account is similar to opening a bank savings account. But there are some extra considerations when opening an account at a credit union.

1. Find a credit union. If you’re not already a credit union member, you’ll need to choose an institution where you’ll open your account. When comparing credit unions, make sure you meet eligibility requirements. You may want to start your search in your local area, where you’re more likely to qualify for membership. You can also search online for credit unions anyone can join. After confirming you’re eligible, compare your options based on rates, fees, accessibility, account features, and customer service.

2. Apply for a share savings account. Many credit unions allow you to apply for a new account and membership online, but you can also do so at a branch. You’ll need some basic documentation, such as your ID and Social Security number, to apply.

3. Make your initial deposit. Unless you have an existing share account at that credit union, you’ll need to fund the share account when you open it. Many credit unions require a $5 deposit, which you can often fund with cash, a check, or a transfer from another account.