What Does It Mean if It Says 'Share Draft' on My Checking Account Statement?

by Tom Streissguth

    The first statement from your new credit union account may require some explaining. Although credit unions function in the same way as retail banks, as an account-holder, you technically buy shares in a credit union, instead of depositing cash into it. If the statement lists a series of share drafts, that means you've been cashing in your shares as well.

    In times gone by, people accessed money and made payments for goods by filling out "bank drafts." The bank draft was a promise of payment in cash from a bank, made out by someone authorized by the bank to sign the promise. The payee presented the document to the nearest branch and received his money (or silver or gold). The bank draft evolved into the modern check, drawn on a numbered cash account.

    Credit unions began as cooperatively owned, nonprofit banking institutions, set up by unions and professional associations. Each member of the credit union that deposited money owned shares in the institution and had access to loans on favorable terms. Eventually, many credit unions opened their doors to the general public. Anyone of legal age could join, make deposits and withdrawals, set up savings accounts and borrow money.

    When a credit union accepts a cash deposit, it credits the customer with shares. The CU then allows the customer to access her money in the form of "drafts" -- a term that harks back to an older banking tradition. A share draft is just a personal check written on a credit union account. When the payee presents the check to the credit union, the CU debits the shares in the account. The main difference between cash in a bank and shares in a credit union is the regular dividends or interest paid on the CU shares.

    Share draft accounts can function in every way like checking accounts. Credit unions will offer debit cards for access, as well as automatic bill pay, direct deposit, overdraft protection and electronic transfers into or out of the account. Most credit unions do not require minimum balances or levy service charges if you don't meet a minimum or write too many share drafts.

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    About the Author

    Tom Streissguth has worked for over 15 years in the legal field as a writer and legal assistant, and has authored numerous articles on Social Security disability law. He has many nonfiction and reference titles in print, including works for The Gale Group and Lerner. He holds a Bachelor of Arts from Yale University.

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