What are Christmas savings clubs and can they save you money?

Christmas is one of the most exciting times of the year, but it can also be the most expensive.

One way to spread the cost is by signing up for a Christmas savings scheme.

We reveal how these schemes work and what you need to consider.

In 2022, YouGov reported that the average Brit spends £642 on Christmas celebrations.

The pressure to spend means that some people rely on credit cards and short-term loans. 

For those struggling with high costs, a Christmas savings club may be tempting, but are they worth it?

What are Christmas savings clubs?

Christmas savings clubs are schemes that aim to make it easier to save for the festive season. 

Savers pay into a scheme throughout the year, and in return, get the cash value of their savings in the form of gift cards or money-off vouchers in time for Christmas.  

The aim is to spread the cost of Christmas via smaller payments over several months to avoid your December budget getting hit hard. 

Christmas savings clubs can also help motivate people to save by putting away a little bit every month.  

These schemes are free to join. In most cases, you’ll only be charged if you cancel or make an early withdrawal.

How do Christmas savings clubs work?

Most Christmas savings clubs encourage members to join at the beginning of the year, as starting to save from this point gives you as much time as possible to build up your funds.  

When you sign up, you can choose what you’d like to save towards, such as gift cards or specific items.

Then you’ll decide how much you’d like to save overall and plan your payments. 

Some Christmas savings schemes set deadlines for paying in money.

This varies according to the scheme, but they all encourage savers to sign up as far in advance as possible. 

But here’s the catch.

While Christmas savings clubs encourage you to save money, you won’t spend any less – you’ll get items or gift cards to the exact value of the amount you paid. 

Variety and Park are two of the best-known Christmas savings clubs – we reveal how these work.  

Park

With Park, you pay in small instalments over the year to a savings target you choose. 

Cancellation charges can apply. If you wish to cancel the entire order, you may be charged 10% of the order value, with a minimum £25 charge. 

Variety

You make regular payments to Variety over a year. There’s a minimum order of £500.  

The final payment is due at the beginning of November.

What if I need to dip into my Christmas savings?

Part of the appeal of Christmas savings clubs is that they help those who struggle to budget while allowing them to access their savings in an emergency. 

However, many schemes discourage this by charging a cancellation fee for early withdrawals.

Is my money protected in a Christmas savings club?

If the firm running a savings club goes bankrupt, you could risk losing your money, as they aren’t covered by the Financial Services Compensation Scheme (FSCS).  

Unfortunately, over 100,000 customers found this out the hard way in 2006 when Christmas savings club Farepak went under.

The average saver lost £400 when the company went bust and it took six years of disputes to recover just half of their money.  

After Farepak's collapse, leading Christmas savings clubs formed the Christmas Prepayment Association (CPA).

The CPA’s code of practice says if anything goes wrong, savers should get their cash back, but it’s not as stringent as the FSCS protections that apply to other financial services.

What are the pros and cons of Christmas savings clubs?

If you’re considering a Christmas savings club, there are a few things to think about. 

What are the advantages of these clubs?

• They can help motivate you to save money with a structured payment plan
• They can spread the cost of Christmas over many months 

What are the disadvantages of these clubs?

• You risk losing your money if the firm goes under
• If you need to make a withdrawal, you may be charged  

• You can only choose from a limited selection of gift cards and vouchers  
• You get no interest on your savings

What are the alternatives?

Many banking apps allow you to set up virtual savings pots.

You could set up your own Christmas savings pot and arrange weekly or monthly transfers. 

Setting aside just £10 a week between January and November means you would save around £400. 

A savings pot with your current account means that you won’t be charged if you make any withdrawals, and it’ll be protected by the FSCS. 

Supermarket savings schemes

Many UK supermarkets run savings schemes throughout the year to help customers save towards their food and drink over Christmas. 

You pay money in, and the supermarket rewards you with a bonus on whatever you’ve saved.  

For example, ASDA’s Christmas Savings Card offers a bonus of £15 if you top it up by at least £280 by 12 November. 

Credit unions

If you already have a credit union account, you can save through its Christmas club.  

Though they work in a similar way as you put small amounts of cash away over the course of several months, credit unions are protected by the FSCS.