Are Christmas Club Accounts a Good Idea?

A Christmas club savings account is a special account you can set up to help fund Christmas gift purchases. Many employers offer these accounts, making it easy to have the money automatically withdrawn from your paycheck, while many banks have stopped offering Christmas club accounts. It is possible that the lack of profitability in offering such an option to consumers has come into play. Why offer a way for consumers to save money to fund Christmas when you really want them to use their credit cards?

Fortunately, credit unions still believe in the Christmas club account – and so do we, especially if it means you’ll set aside cash to pay for Christmas instead of charging everything you buy.

While Christmas club accounts will not earn you a lot of interest, they do provide the discipline that most of us are lacking, because you typically cannot withdraw the money from the account before the holiday season begins. Whether you set aside $5 a week or $100 a month, putting money into a Christmas club account might be a good idea. If you have existing credit card debt, however, you’ll be further ahead in the long run if you take the money you would have set aside in a Christmas club account and pay it toward the balances on your credit cards instead.

Christmas club accounts earn little, if any, interest, so if you are paying 14 to 28 percent interest on your credit card balances, you save a lot more by paying down that debt. The question is: Can you pay down your credit card debt and still have the discipline to avoid using credit cards to fund your holiday spending?

If discipline is an issue (and don’t feel bad, it is for most of us during the holiday season!), then opening a Christmas club account might be a New Year’s Resolution you want to make. But if you choose to pay off your credit debt and can keep from maxing out your credit cards again, you may be giving yourself the best Christmas gift of all: better credit scores and less of your monthly income earmarked for making credit card payments

If you are looking for the best way to pay off your credit card debt and give yourself the gift of more available income each month, check out Ovation’s credit card payoff tools. We have tools to help you achieve your goals, whether you need to get rid of high-balance cards, cards with high interest rates, or a combination of the two.

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