Be Wary of Christmas Clubs

Christmas Clubs are advertised as a way of saving money for the expenses you incur during the Christmas season. You invest an amount of money each month during the year and get your money back in December just in time to buy your Christmas presents. Actually you don’t receive cash that you can spend wherever you wish, but you get the money back in the form of cash vouchers that you can only use in specific stores.

Budgeting for Christmas is something that everyone should start doing in January of each year. By setting aside an amount of money each month, you will have the money you need for the season to cover the expenses of extra groceries and decorations as well as gifts for family and friends. In this way, you can avoid the headache of having bills coming due in January for the purchases you made on your credit cards during December and for which you have to spend the rest of the year making payments to bring down your outstanding balance.

When the Fairfax savings club collapsed just before Christmas in 2006 there were about 15,000 families who never saw any of the money they had paid into the club during the year. As a result, they incurred a lot of extra expenses for Christmas that year.

The Christmas Prepayment Association has reduced the possibilities of such a fiasco happening in the future. This is a regulatory body that has been established to oversee the operations of such savings clubs as Country Christmas, Family Christmas, Park Christmas, Variety Christmas and Post Office Christmas.

The regulations in place will ensure that if any of these clubs do encounter financial difficulties and have to declare bankruptcy, those who do have savings with them will get the cash vouchers they were promised.

One of the main problems with using such a club as a way of saving money for Christmas is that you can only take out the money in December. If you have an emergency at any other time of the year, you will not have access to the cash you have saved because it cannot be withdrawn during the year. Thus if you lose your job, as is the case with many UK families during the recession, you cannot get back what you have paid in to tide you over.

Another disadvantage of the savings club idea is that although you do get all the money back that you paid into the scheme you don’t make any money on the savings. The club does not pay any interest. Even though the amount of interest paid on savings accounts by banks is very low at the present time, at least you do earn some money.

When you want to save money for Christmas, it is better to open a savings account. There are many such accounts available in which you can make deposits of any amounts during the year from £10 to £250, such as that offered by Skipton Building Society Christmas Savers Account. You earn about 3.23 % interest on your money, but like the other Christmas clubs, you can only withdraw the money after November 25 of each year.

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Watch for Rising Fixed Rates on Mortgages

Leading mortgage brokers are warning that as the recession comes to a close, fixed rates for mortgages are going to rise. With the current low rates, there has never been a better time to lock in for a fixed term and save money in the coming years with low monthly payments. Ray Boulger, the senior technical manager at broker John Charcol, says borrowers should act now because rate hikes are imminent. Read more

Tags: Mortgages, outstanding balance, senior technical manager, fixed rate mortgages, better time, high price tag, Mortgage loan