smart spending

Christmas club can tame holiday bills

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."

A 2008 year-end survey by CUNA reports that 71.8 percent of the 8,088 credit unions throughout the nation offer Christmas club accounts, and 82.5 percent of the nation's 91 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.

A few things to keep in mind:
  • Some club accounts pay higher interest than regular accounts, and some pay less.
  • Some pay no interest at all.
  • Some will allow you to have access to the funds earlier in the year if you need them.
  • Some won't release the money at all until the assigned date unless you close the account.

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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