The concept of Christmas cash funds originated with banks. Christmas funds are just savings accounts in which you deposit a certain amount each month, with carrying terms. Some Christmas accounts yield a small amount of interest, while others offer none. Some automatically deduct a fixed amount from your paycheck, while still others have a penalty for early withdrawal. The withdrawal date will be set in late November or early December, giving you an incentive to leave money untouched until then.
Most credit unions and banks offer some variation of a Christmas fund. While it’s a great idea, many people don’t feel that they can make the commitment. If saving a couple hundred dollars for Christmas is a hardship for you, you may also be in a position where you need to keep your funds liquid to handle unexpected situations.
Avoid Debt with Christmas Cash Funds
What you really want to avoid in this situation is charging extravagant purchases at Christmas time. If you put hundreds of dollars on your credit card that you can’t pay off, you’ll pay the penalty in interest in the coming year, or even years–easily doubling the price of your purchases. A sound alternative can be a Christmas cash loan.
A Christmas cash loan is typically based on your paycheck and given from a lender other than your bank. Using your pay stubs to demonstrate your income, you can secure a short term loan that will cover Christmas shopping (or other unexpected expenses). These loans may charge a high interest rate, but must be repaid in a short period of time. Ultimately, this can make them a better long-term option than letting interest accrue on a credit card.