Posted in Finance, Accounting and Economics Terms, Total Reads: 598
Definition: Christmas Club
Christmas club is concept of savings bank account in the US, wherein small deposits of money are made weekly, and the lumpsum amount is withdrawn during the Christmas time. This concept was floated by the major American banks during the recession in 1930s.
Christmas club accounts provide a way to go for systematic savings with automatic withdrawal on deposit of paychecks to a checking account.
The idea behind such a scheme was to make people aware of the benefits of saving in banks and financial institutions. During the great depression, the banks, financial institutions and even the common people were financially fragile. Hence, this concept was introduced which tempted people to save for the holiday season.
However, in case of early withdrawals some of the interest to be paid was deducted, which was not appreciated by the people.