A Christmas Club Account is also referred to as a Holiday Club Account. It is a kind of savings account that enables people to make regular deposits throughout the year in order to accumulate interest. The savings accumulated in the account can be taken out on a date previously determined. The date (usually on December 1st ) is set before the holiday season so that people can have money to do Christmas shopping or travel outside.
How does a Christmas Club Account work?
The principle of a Christmas club account is to help account holders accumulate savings all over the year before the arrival of the holiday season. On the date previously set, the money will be transferred into the saver’s other account like a savings account or a checking account. If you take the funds out earlier than the predetermined date, you will face interest loss and a penalty.
Traditionally during the holiday season, many people are under financial stress because of the holiday shopping or other related expenses. Christmas Club Accounts, therefore, can help savers deal with the problem by keeping them out of credit card debt. The account may also allow holders to work out a holiday budget.
There are also other similar accounts that enable participants to deposit a portion of the paycheck directly into the account every month. Many of the funds will be released in the spring or early summer before summer vacations.
The major purpose of Christmas Club Accounts is to encourage people to achieve their financial goals and avoid debt. However, these accounts do not provide very high interest. Therefore, Christmas Club Accounts are not so common and popular as they were in previous years.