Are Christmas club accounts still a good idea?
Key takeaways
- A Christmas club account is a savings account that locks your money until the holiday season, typically offering a boosted APY, which can range anywhere from 1%-5% APY.
- These accounts work best for people who struggle with impulse spending and need forced savings discipline, but most savers will earn more with high-yield savings accounts.
- Modern alternatives like high-yield savings accounts currently offer rates up to 4% APY with full liquidity and no withdrawal penalties.
- If you’re serious about holiday savings, automatic transfers to a separate high-yield account give you the same discipline without sacrificing returns or access to your money.
A Christmas club account is a short-term savings account designed to help you save for holiday expenses, typically offered by credit unions and small community banks.
These accounts typically pay interest, which can widely range from 1% APY all the way to above 4% APY. Typically, accounts with higher rates come with high minimum requirements or maximum deposit amounts.
Christmas Club accounts also often restrict access to your funds until October or November. While they served a purpose in the 1970s when they peaked in popularity, most Americans can build holiday savings faster and with more flexibility using modern alternatives like high-yield savings accounts.
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No-penalty CDs
If you want guaranteed returns without sacrificing access, no-penalty CDs let you withdraw your money before maturity without fees. Just make sure the CD matures before your holiday shopping begins.
Money market accounts
Money market accounts typically offer higher rates than traditional savings accounts while providing check-writing privileges and debit card access for added flexibility.
Automated savings apps
Apps can automatically transfer small amounts from checking to savings based on your spending patterns, helping you save without thinking about it. Here are Bankrate’s best picks.
Bottom line: Skip the Christmas club and automate smarter savings
Christmas club accounts were useful in an era when Americans had fewer savings options and less access to automated banking. Today, they’re an inefficient way to save for the holidays.
The best strategy: Open a high-yield savings account, set up automatic monthly transfers, and commit to not touching that money until November. You’ll get the same discipline as a Christmas club account, but with better returns, full liquidity and no penalties.
If you struggle with spending temptation, consider using a different bank for your holiday savings — one that requires a few extra steps to access. That psychological barrier can be just as effective as a formal withdrawal penalty, without costing you interest earnings or emergency access to your funds.
The most effective holiday savings strategy is about maximizing your returns while maintaining flexibility for emergencies. A high-yield savings account with automatic transfers gives you both.— Hanna Horvath, CFP & Bankrate Editor
Next steps: Start your holiday savings today
- Review your budget to adjust if needed
- Compare Bankrate’s best high-yield savings accounts to find the highest rates
- Calculate how much you need to save monthly to reach your holiday budget
- Set up automatic transfers on payday to your savings accoun
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