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Christmas club accounts: Are they worth it?

A Christmas savings account can help you save for the holidays, but they’re not known for offering high rates.

A dedicated Christmas club account, often called a Christmas savings account, could help you prepare for the often-expensive holiday. Not only can these accounts help you avoid taking on more debt for the holiday season, but they’re also interest-bearing, so your savings can grow without lifting a finger. But their rates are often very low compared to other deposit accounts, so there are better alternatives to check out.

How do Christmas Club accounts work?

Christmas club accounts are short-term savings accounts designed for holiday expenses. You earn interest on deposits made into the account during the year. Around October or November, you’ll get access to your balance, usually through a delivered check or a direct deposit into your chosen bank account.

Christmas club accounts can help you avoid borrowing to pay for holiday expenses, and they come with early withdrawal penalties to dissuade you from withdrawing your funds too early. Penalty fees are typically around $10 per withdrawal.

Banks and credit unions often offer Christmas club accounts, but these are usually smaller institutions. It’s best to open them early in the year, preferably in January, so you have more time to save before the holidays. Many accounts allow for weekly or monthly deposits or automatic deposits for seamless savings.

Is a Christmas Club account worth it?

Christmas savings accounts are worth it if you’re frequently tempted to pull cash out of your savings. Americans spend nearly $1,000 each year on holiday gifts, according to a recent Gallup poll(1). So depositing around $90 for 11 months would get you to that typical budget. And with the strict early withdrawal penalties, you’re more likely to think twice before withdrawing your Christmas savings.

Since Christmas savings accounts don’t let you withdraw your money, it’s best to get one if you already have an emergency fund set up with a savings account. That way, you can withdraw your money easily in case of an emergency.

But while Christmas club accounts can help you save, the APYs are often very low, ranging from 0.01% to 0.25%. These rates are lower than the national average of 0.45%, according to the FDIC(2). Due to their low rates, it may be worth considering other accounts like certificates of deposit, high-yield savings accounts (HYSAs) and other investing options, which have more earning potential.

Compare savings accounts

Compare top savings accounts by APY and minimum deposits. Select Compare on up to four accounts to see their features side by side.

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1 - 6 of 30
Name Product Account type Annual Percentage Yield (APY) FDIC or NCUA insured amount Minimum balance to earn interest Minimum deposit to open Offer Estimated total balance
BrioDirect High-Yield Savings
Finder Score: 4.4 / 5: ★★★★★
BrioDirect High-Yield Savings
Traditional savings

5.30%

Up to $250,000
$25
$5,000
$1,053
Western Alliance HYSA through Raisin
Finder Score: 4.7 / 5: ★★★★★
Western Alliance HYSA through Raisin
Traditional savings

5.27%

Up to $250,000
$0
$1
$1,052.70
SoFi Checking and Savings
Finder Score: 4.6 / 5: ★★★★★
Bonus
SoFi Checking and Savings
Traditional savings,Checking

4.60%

0.50%

1.20%

Up to $250,000
$0
$0
Get up to $300 cash bonus with qualifying direct deposit. Terms apply. This offer is available until December 31, 2024.
$1,046
Barclays Online Savings
Finder Score: 4.3 / 5: ★★★★★
Barclays Online Savings
Traditional savings

4.35%

Up to $250,000
$0
$0
$1,043.50
Step Black Card
Finder Score: 4.3 / 5: ★★★★★
Step Black Card
Savings app

5.00%

Up to $1 million
$0
$0
$1,050
Bask Bank Interest Savings Account
Finder Score: 4.6 / 5: ★★★★★
Bask Bank Interest Savings Account
Traditional savings

5.10%

Up to $250,000
$0
$0
$1,051
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Alternatives to a Christmas Club account

Here are a few alternatives to consider if you’re not set on a Christmas savings account:

  • Certificates of deposit. If you like the idea of getting penalized for withdrawing funds early so you can stay the course, a certificate of deposit (CD) might be for you. These deposit accounts typically have terms from 3 months to five years, earning a set amount of interest over the term, and you can get hit with early withdrawal penalties if you withdraw before the maturity date.
  • High-yield savings account. If you don’t need a penalty to motivate you to keep your hands off your savings, open a high-interest savings account just for your Christmas money. Plenty of savings accounts have APYs well into the 5% range.
  • Savings account with sub-accounts. If you don’t like the idea of having to manage multiple savings accounts, look for one that offers sub-accounts. For example, Ally Savings and Current let you split your money into different “buckets” or “pods” so you can track and manage multiple savings goals in one place.
  • Budgeting apps. If budgeting isn’t your strong suit, tools like Cleo can help. It offers monthly targets based on your spending, shows where you’re spending your cash and has an AI assistant to help with budgeting.
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Bottom line

Setting aside money throughout the year can help take the stress out of budgeting for the holidays and prevent you from racking up credit card debt. But they usually have lower interest rates than $0-fee savings accounts, and you can’t access your money until a certain time. If you won’t be tempted to spend your money on other things, you’ll want to compare more savings account options and go with a free savings account instead.

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To make sure you get accurate and helpful information, this guide has been edited by Holly Jennings as part of our fact-checking process.
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Editor, Banking

Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto. Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt. Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others. Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full bio

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