Specific-Purpose Savings Accounts
The prime examples are the familiar “Christmas Clubs” or “Vacation Clubs.” A person joining a Christmas Club, for example, might agree to deposit $10 per week over a 40-week period; at the end of that time, he or she would have $400 plus interest to use for Christmas spending. In the meantime the bank has the use of each deposit to invest or lend as it pleases. Originally, club accounts paid no interest. They were simply regarded as a convenient way of encouraging thrift. In recent years however, some states have adopted regulations that force banks to pay interest on club accounts, at a rate usually one-quarter percent lower than the interest paid on passbook savings accounts. A depositor who fails to maintain the account with regular payments as agreed may forfeit the accumulated interest.
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