Savings clubs come in three types: accounts for specific purposes, rewards programs, and membership programs. The first type, like Christmas clubs, requires regular deposits and discourages withdrawals. The second type rewards consumers for certain transactions, while the third type offers discounts to members.
Savings club is a term often used to refer to one of three types of arrangements. First, it can refer to a method of contributing funds to an account for a specific purpose. Second, a savings club can be a rewards program whereby certain parties contribute to one account for another. The third type refers to membership programs that offer savings to participating consumers.
The first type of savings club refers to a program that works similar to a savings account but is generally designed to accumulate funds for a specific purpose. The objective is achieved by regularly depositing a fixed amount of money in a financial institution. One of the most common types of these accounts is known as a Christmas club.
This type of savings club usually requires a person to decide how much they would like to contribute on a weekly basis. Typically, the financial institution where the account is opened will issue a coupon book, similar to deposit slips, that is preprinted with the expected deposit amount. Each week, an individual will remove a coupon and make a deposit for the same set amount.
This may sound similar to a regular savings account, but there are several differences. Withdrawals can be discouraged by making them subject to fees. With a regular savings account, when a person wants their money, they have to withdraw it. With a savings club, the funds are usually disbursed automatically. If the account is a Christmas club, for example, all accumulated funds will typically be sent to the account holder during the holiday shopping season.
The second type of savings club is one that offers rewards in the form of monetary deposits for certain consumers. These plans are often marketed as being beneficial to people who will be responsible for college tuition in the future. Participants in these programs generally earn savings when they do business with certain companies or use certain credit cards. A percentage of such transactions is usually contributed to special accounts where the funds can be accumulated for future use.
The third type of savings club is a membership program that also offers savings to consumers. In this case, however, there is usually no account where the funds are accumulated. Instead, the savings come in the form of discounts offered to those who join the program. These programs may require participation fees or the purchase of cards to be presented by consumers when sponsoring certain businesses.
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