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Nicole Sivens

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Rachel Siegel, CFA

Rachel Siegel, CFA is one of the nation's leading experts at ensuring the accuracy of financial and economic text.

 Her prestigious background includes over 10 years of experience in creating professional financial certification exams and another 20 years of college-level teaching.  Rachel has served as Academic Director at Bloomberg, as well as Exam Development Director at the CFA Institute. She holds a BA in English and an MBA, both from Yale University.

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Updated August 22, 2020

What Is a Christmas Club?

Banks offer different types of savings accounts any time of year. A way to save money toward holiday shopping and seasonal spending is a Christmas Club account. It is marketed to savers as an incentive to save for the end-of-year holidays. It requires opening a short-term savings account that comes with several restrictions. Typically, if the money is withdrawn before a certain date, usually sometime in November, a penalty is charged.

How Do Christmas Club Accounts Work?

Christmas Clubs require a commitment to regularly timed deposits made from one of your primary accounts.

Interest rates are relatively low, although slightly higher than traditional savings accounts, as the main incentive is to simply build a small nest egg by a certain date. When the withdrawal date arrives, you can then withdraw your savings penalty-free. 

Benefits of a Christmas Club

  • Automatic transfers. Account contributions transfer directly from your checking account, so you don’t have to worry about remembering to make deposits.
  • Higher interest rates. Christmas Club and Holiday Club accounts tend to offer slightly higher rates than traditional savings accounts.
  • No debt. Using cash for end-of-year spending bolsters your debt-to-credit ratio, reduces debt, and keeps you flush come January.

Drawbacks of a Christmas Club

  • Savings limits. Most Christmas Club accounts impose a limit on the amount you can deposit
  • Penalty fees. A Christmas Club account limits access. You can withdraw the money when you need it, but expect to pay a fine for it.
  • Interest rates. Christmas Club interest rates are often higher than your average savings account, but there are better options out there. 

What Banks Offer Christmas Club Accounts?

Most major banks have discontinued Christmas Clubs in the last couple of decades. However, Christmas Club accounts have remained popular with smaller, local banks and community-based credit unions. In fact, 72% currently offer them. 
 

Christmas Club Background 

The Carlisle, Pennsylvania Trust Company offered the first Christmas Club account to its customers in 1909. Christmas Club accounts became popular during the Great Depression, acting as a simple incentive to get people to save during hard times in preparation for the holidays.

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Rachel Siegel, CFA is one of the nation's leading experts at ensuring the accuracy of financial and economic text.  Her prestigious background includes over 10 years of experience in creating professional financial certification exams and another 20 years of college-level teaching.

If you have a question about Christmas Club, then please ask Rachel.

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