Sunday, November 30, 1997
Christmas clubs make a comeback
By JIM GALLAGHER
St. Louis Post-Dispatch
In an era of instant credit, the old-fashioned Christmas Club is holding
its own as a symbol of family thrift.
Credit unions say 15 percent to 20 percent of their members sock away
a part of each paycheck in hopes of having a merry Christmas without debt.
The figure hasn't changed very much over the years, said Michelle Rosner,
marketing director at Aerospace Credit Union in St. Louis.
"I think the clubs are a great idea, especially as a way to hold
down on the credit-card loans," said Rosner. "You pay a little
each week to the Christmas club, then the holidays don't hit so hard."
Most people participate through payroll deduction, either through a credit
union linked to their employer, or through an employer-sponsored club.
The interest they earn is modest, to say the least. Calls to a handful
of credit unions around St. Louis found interest rates running about 3 percent
to 3.3 percent.
A money-market mutual fund would pay 5.1 percent, and you could land
4.9 percent with a 6-month bank CD.
Some Christmas clubs also impose a penalty -- sometimes $25 -- for people
who withdraw the money before the holiday shopping season.
But a Christmas club requires no minimum balance to start. A CD may require
a few hundred dollars and a money market fund may demand $1,000 or more.
That makes the clubs a rather painless way to save for people who don't
have much savings to begin with. Many club members contribute only $10 or
so for each pay period.
At First Community Credit Union in St. Louis, the average club account
holds $750 by November. That nearly matches the $800 or so that the average
person plans to spend on Christmas.
Credit unions say they're getting a bigger share of the club pie.
"Very few of the large financial institutions still offer Christmas
Clubs," said Gina House, marketing director at First Community Credit
Union. "Most big banks have dropped it from the product line."
Bankers dispute that statement, however. In fact, some banks report that
demand for Christmas Cubs is actually rising lately.
"For a while, it went out of style, but they seem to be making a
comeback," said Virginia McGuire, spokeswoman for the American Bankers
Association in Washington.
"It's kind of like ... old clothing from the '60s is back in style
today."
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