Christmas Clubs are a prize turkey for saversSavings clubs are best avoided finds Which? Money

29 November 2010

Christmas piggy bank

Christmas savings clubs are best avoided according to Which? Money research. We found that savers with these companies won’t enjoy the interest or the guaranteed protection that other savings options can provide.

Four years on from the collapse of Farepak, Christmas clubs still promise to spread the cost of Christmas by collecting small contributions from customers over the course of the year. 

One of the key appeals of these clubs is the way your money is locked away so there’s no temptation to spend it before Christmas. Instead of getting the money back, savings are converted into vouchers or presents, food and other goods.

No Protection

Importantly however, the Financial Services Authority does not always treat Christmas clubs as savings – instead they are seen as pre-payment of goods, and are not covered by the Financial Services Compensation Scheme. This means your money may not be protected if the company should fail.

Some Christmas clubs will have their own protection systems in place. It’s worth asking about these in advance if you decide to save in a scheme. But remember - unlike conventional savings options, Christmas clubs will not accrue interest, meaning it’s likely your money will depreciate in real terms value over the course of the year.

Alternative Savings Options

Following the collapse of Farepak, the Treasury reported that people using Christmas clubs weren’t always confident using mainstream banks, suggesting credit unions or building societies might provide alternative Christmas savings schemes. 

Yorkshire Building Society and Skipton Building Society both offered their own Christmas savings schemes in 2010. The credit unions available to you may depend on your local area or your place of work.

For more, see our Best Rate Savings accounts or share your thoughts on Christmas Clubs on the Which? Conversation.

pound coins

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