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

Your credit union deals in shares, not cash deposits.

Keith Brofsky/Photodisc/Getty Images

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.

Check History

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

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.

Share Drafts

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.

Functions and Features

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.

Photo Credits

  • Keith Brofsky/Photodisc/Getty Images

About the Author

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.

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