Early present

26th October 2007 at 01:00
Christmas shopping may seem fun now, but your credit card bill in January won't be. Savings clubs and accounts can ease the pressure on your purse, says Alison Brace.You might not be counting the weeks just yet but, let's face it, Christmas is but a short hop away. The words nativity, panto and Santa's costume will be tripping off the tongue like last year's test results before you've even had chance to get used to the clocks going back. However, there is an upside to all of this. If, by dint of your profession, Christmas comes early every year, you may as well take advantage and get organised outside the classroom, too, and spread the cost of the festive season.

Planning your purchases and budgeting wisely is, of course, the answer. Saving regularly during the year is an even better option to offset outgoings during the costliest month of the year.

But last year's collapse of Farepak, the Swindon-based Christmas savings scheme, which cost more than 170,000 customers anything between pound;400 and pound;2,000, was hardly an incentive for anyone to set aside money for Christmas 2007. A year on, how can you be sure that any saving is safe? Well, the Farepak collapse might have ruined Christmas for its customers but it helped to ensure checks and balances were put in place to stop it happening again.

A Government-backed review of "hamper schemes", as they are known, led to ministers introducing financial safeguards that protect cash paid into such schemes. The review, led by Brian Pomeroy, chairman of the Financial Inclusion Taskforce - which was set up to monitor progress towards tackling financial exclusion - found that about 700,000 people shun traditional banks in favour of savings clubs, where money, paid to a local agent during the year, is redeemed near Christmas in shopping vouchers or food hampers. The main reasons for using one, he found, were convenience and the "locking in" of cash.

But his review also argued that big financial institutions could do more to promote their own Christmas saving accounts and that these were a better option for the financially-savvy.

So what's on offer? On the back of the Farepak scandal, the Skipton and Scarborough building societies launched high-interest Christmas saver accounts.

The Bradford and Bingley also launched one with a whopping 10 per cent interest rate - although this account, in common with Skipton, requires compulsory monthly payments of between pound;10 and pound;150. And the saved money cannot be accessed until November.

Tesco, Morrisons, Somerfield and Iceland run Christmas saver schemes with cash bonuses for customers. In terms of convenience, these are great for savers who visit their local supermarket regularly. But remember that the money saved with these schemes has to be spent in store. Visit www.moneysavingexpert. com for details of bonuses.

Stores such as Wilkinson and Woolworths run Christmas saving schemes along the lines of the supermarkets. And this year, Argos launched its Christmas club card, which is being trialled in 100 stores across Greater Manchester, the North-west and North-east of England.

Again savers receive small bonuses, and money cannot be accessed until the card is activated on November 11. The card is to become available nationwide from January. The Pomeroy review also paved the way for a pound;6 million cash injection by the Treasury to support the work of credit unions and other community financial institutions.

The Ipswich and Suffolk Credit Union (ISCU), for instance, runs a Christmas savings account used by 260 of its customers. Some 60 days' notice is required if money is to be withdrawn during the year. From November, savings can be withdrawn in the form of cash or vouchers. "First and foremost, a credit union is a safe place to put your money," says Simon Pain, manager of the ISCU. "We are regulated in the same way as a bank or building society."

There are about 400 credit unions nationwide, managing more than pound;348 million on behalf of 426,000 members, according to the Association of British Credit Unions (Abcul). And numbers are growing. One college in Wales has set up its own sub-branch of a credit union.

Pengwern College in Denbighshire was helped by Clywd Coast Credit Union to set up a banking service for students and staff. The college, for youngsters with learning disabilities, wanted a practical way to teach pupils how to manage their money. Now the college's sub-branch of the credit union is set to open its doors to the public from next year.

"Credit unions are financial co-operatives, owned and controlled by their members," says Mark Lyonette, chief executive of the association. "They offer easy savings schemes for all sorts of needs, including Christmas, and they provide affordable loans."

There is, of course, another way of looking at those Christmas finances. If you are very good at managing your money, maybe one of the cashback credit cards on offer could be the way to make your funds go further. But remember these deals only work if you pay your balance off in full every month. Otherwise you could end up paying out more cash, rather than getting any back


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