Legal Definitions - share draft

A share draft is a payment instrument issued by a credit union, functioning in much the same way as a personal check issued by a bank. When a credit union member writes a share draft, they are essentially instructing their credit union to pay a specified amount of money from their account to another person or entity.

The term "share" refers to the member's ownership shares in the credit union, which represent their deposits, while "draft" signifies an order to pay money. Therefore, a share draft is a written order drawn against a member's funds held at a credit union.

• Example 1: Paying a Monthly Bill
  Sarah, a member of her local credit union, needs to pay her internet bill. Instead of using an online payment or a debit card, she writes a share draft for the exact amount and mails it to the internet service provider.

  Explanation: This illustrates a share draft being used for a routine monthly payment, demonstrating its function as a traditional paper-based payment method, similar to a check, drawn on funds held in a credit union account.

• Example 2: Purchasing Goods at a Local Market
  Mark is at a craft fair and finds a unique handmade item. The vendor only accepts cash or checks. Since Mark primarily banks with a credit union, he writes a share draft to the vendor for the purchase price of the item.

  Explanation: This scenario shows a share draft being used for a direct purchase of goods, highlighting its acceptance as a valid form of payment in transactions where electronic payments might not be available or preferred.

• Example 3: Contributing to a Group Gift
  A group of colleagues is pooling money to buy a retirement gift for a coworker. Emily, a credit union member, writes a share draft payable to the colleague organizing the collection for her contribution.

  Explanation: Here, the share draft serves as a convenient and traceable way for Emily to transfer funds from her credit union account to another individual, demonstrating its utility for personal financial transfers and contributions.