A traditional savings account to help brighten the holidays.
Start saving for the holidays with our Christmas Club Savings. With this account you are able to keep your holiday shopping funds separate from your traditional savings account. With just a minimum opening deposit of $5, getting started is easy.
- Minimum opening deposit is $5
- The current rate is variable and subject to change
- The account will mature on October 31
- A minimum balance of $5 is required to obtain the current Annual Percentage Yield
- Fees could reduce earnings on the account
- No withdrawals allowed
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Current RateChristmas Club Savings
1. Interest rate is variable and subject to change at the discretion of the bank. Fees could reduce earnings on the account.
* APY Current as of
December comes with a whole slew of expenses that can really break your budget if you haven't been saving up for
them. Between buying gifts, hosting parties, and traveling to visit family, you can easily spend hundreds, or even thousands, of dollars. Unless you have been saving money throughout the year, you will probably end up putting these expenses on a credit card. You'll be stuck paying for them all year next year, or longer, and the interest expenses will add up. Instead of going into debt next year, consider opening a Christmas club account to help you reach your savings goals. How
Christmas Club Savings Accounts Work A Christmas club account is a savings account offered by many banks and credit unions. You typically open the account at the beginning of the calendar year and set up automatic contributions to the account on a regular schedule, whether you choose to make them weekly, bi-weekly, monthly, or quarterly. The bank or credit union often pays interest on the balance in the account throughout the year so your savings will grow. Near the end of
the year, you can withdraw the money saved and all of the accrued interest and use this money to make your holiday purchases. Many banks and credit unions charge penalty fees if you withdraw money from your Christmas club account before the designated withdrawal period. Each bank or credit union has its own specific details that you need to read and understand before opening the account. Advantages and Disadvantages The main advantage to a Christmas club account is
that it forces you to save money throughout the year for your holiday spending. Because the money is in a separate account that may have early withdrawal penalties, you are much less likely to dip into it than you would be if you just left the money in your checking account or stashed cash in your home. Another advantage is that Christmas club accounts often pay higher interest rates than other types of savings accounts with similar deposit amounts. And of course, your Christmas club savings has
the advantage of helping you avoid accumulating credit card debt while doing your holiday shopping. Christmas club accounts are not the best choice for everybody, though. For example, if you like to do your shopping throughout the year, you will have trouble if your money is stuck in the account until the fall. Another potential disadvantage is that some accounts automatically deposit the account balance into your checking account in the fall, and you might accidentally spend your
Christmas money on other expenses if you didn't notice the deposit.
Definition and Example of a Christmas Club Account
A Christmas club account is a short-term savings account that’s specifically intended for holiday spending. It can help you save the money you need to pay for gifts, outings, outfits, travel, and other holiday-related expenses.
- Alternate names: Holiday club account, holiday savings account, Christmas savings account
For instance, say you wanted to buy an expensive gift for a family member this year. You could open a Christmas club account and put away a little bit of money each month so that you could pay for the gift in cash when the holiday shopping season rolls around.
How a Christmas Club Account Works
You can open a Christmas club
account at a bank or credit union at the beginning of the year, preferably in January. You'll then make consistent payments that can be weekly, bi-weekly, or monthly, and they can come directly from your paycheck. It all depends on your budget and preferences.
Note
You usually don't need a lot of money to open a Christmas club account. Many financial institutions require a deposit as small as $1.
Not every financial institution offers Christmas club accounts, so you may have to shop around to find one that meets your needs.
Are Christmas Club Accounts a Good Idea?
You don't need a Christmas club account to save money for the holidays. Nothing stops you from opening a run-of-the-mill savings account that you can withdraw from according to your needs.
Compare interest rates to determine which is the better option for you. For example, the average annual percentage yield (APY) on regular savings accounts was 0.08% as of June 2022. In comparison, Founders Federal Credit Union paid 0.15% APY on a Christmas Club Account the same month. Meanwhile, a high-yield savings account at Ally Bank paid 0.90% APY in June 2022.
Pros and Cons of a Christmas Club Account
Pros
Makes holiday saving easier
Helps avoid credit card debt
Cons
Most accounts only allow withdrawals during a certain time
Saving limits are common
Pros Explained
- Makes holiday saving easier: A Christmas club account can simplify the process if you struggle to save money for the holidays. You can set up automatic transfers and "set it and forget it" until you need the money.
- Helps avoid debt:It's not uncommon for people to charge holiday purchases to their credit cards and accumulate credit card debt. You won't have to charge everything to your card to enjoy the holidays with a Christmas club account.
Cons Explained
- Most accounts only allow withdrawals during a certain time: Christmas club accounts may only allow you to withdraw money when your term is up, typically in October or November. You'll likely be charged a penalty, such as $15, if you decide to take the funds out before your withdrawal period is over.
- Saving limits are common: Christmas club accounts usually have savings limits, such as up to $10,000, so you may not be able to save as much as you'd like.
Note
You may be better off with a traditional savings account if you want the freedom to take your money out at any time during the year. However, the motivation of a penalty on a Christmas club account may be worth it if you're worried you won't stick to a savings plan.
How To Get a Christmas Club Account
You can find Christmas club accounts at small banks and credit unions. If you're a member of a credit union, you may already have access to a Christmas club account. And if you aren't, you can search for one near you.
Credit unions typically have membership requirements, so check those out before you apply.
Alternatives to a Christmas Club Account
Budgeting is the first step in setting yourself up for success when it comes time for holiday spending. Consider how much money you need and then start saving it, whether in an account or just in an envelope. Here are a few other alternatives to consider if a Christmas club account isn't right for you.
Savings Account
You can open a regular savings account at your bank or credit union. Label it "holiday spending" and contribute as much or as little money as you'd like. You can set up automatic transfers from your checking account so you don't forget.
Certificate of Deposit (CD)
A CD is a savings account that holds a fixed amount of money for a predetermined period of time and pays more interest than a savings account. You can open a short-term CD, such as a six-month CD, deposit your cash into it, and keep it locked up until the holiday season arrives. The downfall with this option is that you'll need the full amount of money to open the CD upfront.
Layaway or Buy-Now-Pay-Later Plan
A layaway plan may be your best bet if you want to make a big-ticket holiday purchase like a television or a computer. Many stores will allow you to pay off your items in installments for free or for a small charge. Some stores also partner with buy-now-pay-later (BNPL) providers, which allows you to break up your purchase into a few payments over time. Whatever you do, make sure you read the fine print before you commit to a layaway or BNPL plan.
Credit Card Rewards
Do some research to find the best credit cards for your spending habits. You may be able to rack up cash back, gift cards, airfare points, or other rewards and then use them toward your holiday spending.
Key Takeaways
- Christmas club accounts are offered by some credit unions and banks, and they can help you save for the holiday season.
- These accounts help you save specifically for holiday-related expenses, but they can also come with savings limits and penalties for early withdrawals.
- Alternatives to Christmas club accounts include regular savings accounts, CDs, layaway and buy-now-pay-later (BNPL) plans, and credit card rewards.