Brandon Lee
Christmas club accounts are still offered by some community banks, smaller banks, and credit unions. These accounts were most popular in the 1960s and 1970s and allowed customers to save small amounts of money throughout the year to spend during the holiday season. While they can be a great way to save for Christmas, Christmas club accounts often have low interest rates and may charge fees for early withdrawals.
| Characteristics | Values |
|---|---|
| Banks that offer Christmas Club accounts | Community banks, smaller banks, and credit unions |
| Purpose | Short-term savings fund to help manage annual holiday spending |
| History | Started in 1909 at a Pennsylvania bank; gained popularity in the 1950s and 1960s, peaking in the 1970s |
| Interest rates | Generally low; some banks offer less than 1% APY |
| Withdrawal rules | Withdrawing funds early may incur penalties and loss of interest |
| Deposit rules | Regular, scheduled contributions; some accounts allow automatic transfers from checking accounts |
| Maximum amount | Varies by bank; some allow up to $5,000 |
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What You'll Learn
Some banks still offer Christmas clubs
Christmas club accounts were very popular in the 1960s and 1970s but have declined in popularity since then. However, some banks and credit unions still offer Christmas club accounts. These include smaller banks, community banks, and local credit unions. Some examples of banks that offer Christmas club accounts are:
- American Bank & Trust
- CDC Federal Credit Union
- Consumers Credit Union
- PenAir
- First National Bank of Kansas
Christmas club accounts are a great way to save money for the holidays. They are a short-term savings fund that can help you plan and manage your holiday spending. You can set up weekly or monthly automatic transfers from your checking account to your Christmas club account. However, it is important to note that these accounts typically have low-interest rates and may have penalties for early withdrawals.
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Low interest rates
Christmas Club accounts are still offered by some smaller banks and credit unions. However, they typically offer low interest rates, which are usually lower than those of regular savings accounts, money market accounts, and certificates of deposit (CDs). At some banks, these accounts pay less than 1% APY.
The low interest rates on Christmas Club accounts can be a downside for customers, especially when compared to other savings options that offer higher returns. For example, money market accounts often pay higher interest rates than Christmas Club accounts and provide more flexibility and liquidity.
Additionally, some Christmas Club accounts charge early withdrawal fees or penalties, which can further reduce the attractiveness of these accounts. These accounts also typically have a maximum dollar amount that can be saved, and there may be set monthly deposit requirements.
Despite the low interest rates, Christmas Club accounts can still be worthwhile for those who struggle with holiday spending. They encourage customers to save small amounts of money throughout the year, helping them to budget and avoid credit card debt during the holiday season.
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Withdrawal penalties
If you withdraw money from a Christmas club account early, you may be charged a penalty fee, and you could also lose any interest earned. The penalty fee amount varies, with one source citing a $20 charge for early withdrawals. Some Christmas club accounts allow for one or two penalty-free early withdrawals.
Christmas club accounts are not the only savings accounts with early withdrawal penalties. Certificates of deposit (CDs) also impose penalties for early withdrawals. However, these accounts tend to offer higher interest rates than Christmas club accounts.
If you don't need withdrawal penalties to stay on track with your savings, a high-yield savings account (HYSA) may be a better option. These accounts often offer very high APYs, with some rates above 4%. They are often free to open and can be designated for holiday savings. However, some HYSAs limit withdrawals to six per month.
Before opening a Christmas club account, carefully explore the alternatives to find the best option for your savings goals.
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Alternatives to Christmas clubs
Christmas club accounts are a form of savings scheme where you contribute a small amount of money regularly, either weekly or monthly, throughout the year. The money is withdrawn in October, November, or December and used for holiday expenses. These accounts are still offered by some community banks and credit unions, but they usually have low interest rates and limited flexibility.
- High-yield savings accounts (HYSAs): These accounts can offer very high annual percentage yields (APYs) and are often free to open. They may, however, limit withdrawals to a certain number per month.
- Certificates of deposit (CDs): CDs offer fixed interest rates over terms ranging from three months to ten years. They typically provide higher interest rates than Christmas club accounts, but they also impose penalties for early withdrawal.
- Savings accounts with sub-accounts: Some accounts, like the SoFi Checking & Savings Account, allow you to create "buckets" or "pods" to organize your savings goals.
- Cash ISAs: These are a great way to save for any purpose, including the holidays. There are two types of ISAs: fixed-term and instant access. Fixed-term ISAs do not allow you to withdraw your savings for a set period, while instant access ISAs may charge a penalty fee for early withdrawals.
- Traditional savings accounts: These accounts offer low interest rates, typically around 0.5% annually, but they can be a good option if you want to save for a rainy day or a specific purpose, such as holiday expenses.
- Supermarket saving schemes: Many supermarkets offer saving schemes that provide special offers and money off in-store purchases.
In addition to these financial alternatives, there are also fun and creative ways to celebrate the holidays without focusing on material gifts. For example, you could organize a holiday charity event, such as volunteering at a local shelter or hosting a food drive. You could also try a holiday scavenger hunt, a cooking or chocolate-making workshop, or a holiday-themed board game tournament. These activities can strengthen relationships and build teamwork while celebrating the season in a unique way.
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History of Christmas clubs
Christmas Clubs, or holiday clubs, are a type of savings account designed to help people save for their holiday shopping. Customers would deposit a set amount of money each week into a savings account and receive the money back at the end of the year for Christmas shopping. The accounts were popular in the 1960s and 1970s but have become less common in recent years.
The first Christmas Club was started in 1909 by Merkel Landis, treasurer of the Carlisle Trust Company of Carlisle, Pennsylvania. Landis introduced the first Christmas savings fund, which attracted 350 customers who saved about $28 each (equivalent to $980 in 2024), and the money was disbursed on December 1 of that year. The concept was simple: allow people to protect their money from themselves by charging fees for withdrawals before the holiday season.
Over the following decades, financial institutions competed for the holiday savings business, offering enticing premiums and advertising items such as tokens. The popularity of Christmas Club accounts wasn't a mystery; people assumed they'd spend the money if it was in a regular account. However, Christmas Club accounts had their drawbacks, including low interest rates and a high number of restrictions, such as not allowing withdrawals unless fees were paid.
In the 1970s, economic changes such as high inflation rates and financial deregulation, along with the growing popularity of credit cards, made Christmas savings accounts less attractive. Technological advancements, including digital banking and online shopping, also provided consumers with more flexible and efficient ways to manage their finances. Today, Christmas Club accounts are rarely offered by financial institutions, but some local credit unions and community banks still provide them.
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Frequently asked questions
Yes, some community banks, smaller banks, and credit unions still offer Christmas Club accounts.
A Christmas Club account is a short-term savings fund that can help you plan and manage your holiday spending.
You make regular contributions to the account throughout the year, and the money is withdrawn in October, November, or December, depending on the bank’s rules. The funds are then transferred to your regular checking account or withdrawn as a check to cover holiday expenses.
Christmas Club accounts can help you save money for the holidays and avoid overspending on credit cards. They also provide a structured way to save a little at a time, so you build a nest egg by the end of the year.
Christmas Club accounts typically have low-interest rates, and some banks cap the maximum amount you can save. There may also be penalties for early withdrawals.
