A Look at Christmas Clubs

Christmas clubs have been around since the early twentieth-century. Over the years, though, they have become less popular. With that being said, there are still many institutions that offer Christmas club accounts. Along with this, there are millions of people who take full advantage of them.

The concept of Christmas clubs is simple: financial institution customers deposit money every week or month throughout the year into a special account. At the end of the year, the money is given back to them for Christmas shopping–this is where the name comes from.

Christmas Club Advantages

The main benefit of Christmas clubs is that you are able to put money away, week after week, and then have it available for the holiday season. While you may be able to do this on your own, many people do not have enough discipline. For this reason, it makes perfect sense to take advantage of a Christmas club.

Another reason Christmas clubs are used is that you can earn interest on your money. So, not only are you going to get your money back at Christmastime, but there will be earned interest. The more money you put into your Christmas club account throughout the year, the more you will earn in interest.

Christmas Club Disadvantages

Of course, there are also reasons Christmas clubs have declined in popularity since the first one was introduced back in 1909. The main drawback involves one of the main advantages: the interest that you earn is very low. It is good that you are earning something for stashing your money in the account, but it is not nearly as much as it could be if you were to focus on another type of investment.

What if you want your money before Christmastime rolls around? In this case, you will probably have to pay a fee. This is not something you would have to do if you kept the money in a personal savings or checking account. Unless you know for 100 percent certain that you will not need the money before Christmas, it is best to avoid this type of account.

High Costs for Banks

The consumer is not the only one that has to worry about the drawbacks of Christmas clubs. Despite the fact that many banks still offer these accounts, they can be costly. Fortunately, the costs are not as high as they were in the past thanks to online banking and debit cards. This means that most people will not require a paper check be mailed to them.

There are pros and cons of Christmas clubs. On the positive side, this is a great way of saving money for one of the most expensive times of the year. Yet on the other side, you have to consider the potential drawbacks including low interest rates and early withdrawal fees.