Legal Definitions - share-draft account

A share-draft account is a type of transactional deposit account offered by a credit union, functioning much like a checking account at a traditional bank. It allows credit union members to deposit funds, make payments using "share drafts" (which are similar to checks), utilize debit cards for purchases, and access their money for routine financial transactions. The term "share" reflects the fact that members are part-owners of the credit union.

• Example 1: Paying Monthly Bills

  Scenario: Sarah receives her monthly electric bill and writes a share draft from her credit union account to pay it. The utility company deposits the share draft, and the funds are debited from Sarah's account.

  Explanation: This illustrates a share-draft account's primary function: enabling members to make payments using a written instrument, just as they would with a traditional check from a bank checking account.

• Example 2: Direct Deposit and Debit Card Use

  Scenario: Mark's employer directly deposits his bi-weekly paycheck into his share-draft account at the local credit union. Later that day, Mark uses his credit union debit card, linked to this account, to buy groceries at the supermarket.

  Explanation: This example demonstrates how a share-draft account facilitates both incoming funds (direct deposit) and outgoing payments (debit card purchases) for everyday financial management, highlighting its role as a central hub for a member's transactional needs.

• Example 3: Online Bill Pay Setup

  Scenario: Emily wants to automate her rent payment. She logs into her credit union's online banking portal and sets up a recurring electronic payment from her share-draft account to her landlord's bank account.

  Explanation: This shows the modern functionality of a share-draft account, extending beyond physical share drafts to include electronic funds transfers and online bill payment services, providing convenience and efficiency for managing regular expenses.