Prepaid Gift Cards as Christmas Savings Accounts

Think it’s a bit early to be thinking about holiday shopping? Some issuers of prepaid gift cards don’t think so. Many retailers are hoping to boost holiday sales this year by promoting “Christmas Club Accounts”.

Remember the old Christmas Club accounts from the 1960’s and 1970’s? Well, they are back. This time, however, they use the technology of prepaid debit cards. Here’s how they work. First, you open a prepaid card account at the retailer you want to shop for the holidays (Sears and Target both offer Christmas Club cards). Then, you start depositing funds into your account.

Depending on the terms of the Club, the sponsoring retailer will typically pay some bonus amount based on your deposit schedule. For example, Sears will pay you a 3% bonus for any deposits you make by November 14. So, if you put $300 into your Sears Club card by November 14, Sears will pay you a bonus of $9.

The reward amount is a nice feature, but the reason why Christmas Club savings accounts can be a great idea is that they force you to save for the expense of holiday shopping. If you know you need to spend $300 for your holiday shopping, why not get started saving for it today? If you can put away $30 a week for 10 weeks, you’ll easily meet your objective (without dipping into your credit card balance!).

When the time comes to go shopping, you simply use the prepaid debit card associated with your Club account and use it at the sponsoring merchant (either in-store or on-line).

Christmas Club programs have been around for years. We found a cool advertisement from the Lakeland (Florida) Ledger, dated December 2, 1960 which touts the benefits of a Christmas Savings club. Here’s the ad:

Prepaid Christmas Account

Prepaid Christmas Account

The idea of saving for a big expense, such as holiday shopping, is not a new one. The use of prepaid cards to make it easier to save, track, and use your savings is relatively new.

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