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What is a Share Draft Account? A Comprehensive Legal Overview
Definition & Meaning
A share draft account is a type of transaction account that members hold at a credit union, similar to a checking account at a bank. It allows users to deposit funds that are accessible on demand. Members can write an unlimited number of checks, known as share drafts, which are payable to third parties. These accounts typically come with federal insurance for added security. Interest earned on share draft accounts is usually compounded quarterly. This account type was established under the Consumer Checking Account Equity Act of 1980.
Table of content
Legal Use & context
Share draft accounts are primarily used in the context of credit unions, which operate as cooperative financial institutions. They are relevant in areas such as consumer finance and banking law. Users may need to fill out forms related to account opening, maintenance, or disputes, which can often be managed using legal templates available through services like US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A member of a credit union opens a share draft account to manage their daily expenses. They can write checks to pay bills and make purchases as needed.
Example 2: A user deposits their paycheck into a share draft account and uses the funds to cover monthly expenses, enjoying the benefits of interest accrual and federal insurance.
State-by-state differences
Examples of state differences (not exhaustive):
State
Notes
California
Share draft accounts are widely used and regulated under state credit union laws.
Texas
Similar regulations apply, but some local credit unions may have unique terms.
New York
State laws provide additional protections for share draft account holders.
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Checking Account
A deposit account held at a bank that allows withdrawals and deposits.
Generally offered by banks rather than credit unions.
Negotiable Order of Withdrawal (NOW) Account
A type of interest-earning checking account.
NOW accounts typically require a minimum balance and may have withdrawal limits.
Common misunderstandings
What to do if this term applies to you
If you are considering opening a share draft account, research different credit unions to find the best terms and benefits. You can use US Legal Forms to access templates for account applications and related documents. If you encounter issues with your account, consider seeking professional legal advice.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.
Jurisdiction: Regulated by federal and state laws.
Possible penalties: Varies by credit union policies.
Key takeaways
Frequently asked questions
A share draft account is a type of checking account offered by credit unions that allows members to deposit and withdraw funds on demand.
While both serve similar purposes, share draft accounts are specifically associated with credit unions, whereas checking accounts are typically offered by banks.
Yes, many share draft accounts earn interest, which is usually compounded quarterly.