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Avoid
hock shock
"Many, many credit unions offer Christmas clubs,"
says Mike Schenk, vice president of economics
and statistics for the Credit Union National Association.
"They're a handy way for budgeting for big outlays.
For big-ticket items that occur on a regular basis,
many credit unions offer these accounts so people
don't have to go into hock."
Schenk says that a 2006 year-end
survey reports that 76 percent of the 8,700 credit unions
throughout the nation offer Christmas club accounts
and 83 percent of the nation's 90 million credit union members have access
to the service at their credit unions.
"It's a good idea, as opposed to borrowing, like a
credit card," says Steve Brobeck, executive director
of the Consumer Federation of America. "It's far
less expensive to save money in a Christmas club,
even one that pays little or no interest, than
to finance purchases with a credit card. They're
fundamentally a good idea that those who cannot
afford to pay cash for Christmas-related expenses
should consider."
Before you open a Christmas club account, Brobeck
and Schenk agree, you need to pay attention to how the account is
structured.
Old-fashioned,
but still highly efficient
It's a balancing act. More interest is nice, but opening an
account that you won't dip into before next Christmas (because of
a penalty fee) is also valuable.
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A few things to keep in mind: |
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Some club accounts pay higher interest than regular accounts, and some pay less. |
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Some pay no interest at all. |
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Some will allow you to have access to the funds earlier in the year if you need them. |
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Some won't release the money at all until the assigned date unless you close the account. |
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Give
your bank a try
If you're not a credit union member, your bank
may offer you a Christmas club program.
As with credit unions, you'll want
to check with your banker on the specifics of
the account. Your interest rates will be low --
that's a fact with any Christmas club account
-- and you'll want to ask about early withdrawal
fees and how to access the funds if you need them
early.
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