Christmas Savings Clubs – Good or Bad

Christmas Savings Clubs – are they worth it?

 

With the New Year only just underway, thoughts are already turning to the next festive season. Adverts are appearing proclaiming that you can make Christmas 2017 the best one ever, if you join a Christmas Savings Club

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Christmas Savings Clubs
Saving for Christmas

Park, once one of the biggest names in the Christmas Hamper industry have shifted their focus away from providing groceries and frozen food.  Now they are focusing on the voucher market, rather than the hassle of making up all those pesky hampers on which they charge a hefty premium.

 

Whilst Park do still provide a limited number of hampers and gifts, some Christmas savings clubs offer only vouchers as a reward for saving with them throughout the year.  Variety Christmas Savings Club have been in business over 35 years yet only offer a limited number of High Street vouchers.  These do however include big names such as Love2Shop, Amazon, Argos, Boots, Marks and Spencers, Tesco and Sainsburys.

 

Even so around a million people still use christmas savings clubs to put a little aside each week for the biggest day of the year. But do they represent good value for money?

Benefits of Christmas Savings Clubs

You can put a little aside each week to budget over the year
There is no temptation to dip into your savings
You know in advance what you will be getting
Agents can earn commission on sales.

Disadvantages of Christmas Savings Clubs

They are very restrictive and inflexible
You can get much better rates of interest and deals elsewhere
If your agent does not pay the company you might lose your savings
They do not represent very good value for money.  Hamper companies for example place an average of 20% mark up on all their products.  Supermarkets often offer the same products with considerable savings at Christmas time.
You do not receive any bonus or interest on your money.  Vouchers are often only for face value yet the company has been earning interest on your money all year round.

What alternatives are there for Christmas Savings Clubs??

Banks and Building Society Accounts

You can put a little aside each week and earn a small amount of interest making your money go further.  If you are tempted to withdraw the money you could ask a friend or relative to look after your bank card or building society book.  A notice account will pay more interest than a standard savings account.  Because you have to give notice before you can withdraw money, this will stop you dipping in to your savings.

Some banks have a “round up” service which will round each transaction you make up to the nearest pound and pay the pence into a savings account.  You hardly miss the pennies but see how much starts to build up in your savings account!

Credit Unions

Some credit unions provide Christmas Savings Clubs but also pay interest on your savings.  You will not be able to access your money until December, but because credit unions are protected under the Financial Service Compensation Scheme your money will be safe all year round.  Check to see if there is a credit union near you who offers such a scheme.

Supermarket Savings Schemes

Many supermarkets run their own savings schemes where by you either buy savings stamps or put some money aside each week to pay for your Christmas Shop.  Many of these also offer some form of bonus if you fill up your card with stamps or save a certain amount.  Even putting away one pound each week which is an amount most people wouldn’t miss would pay for Christmas dinner.  The disadvantage to supermarket savings is of course you must spend the savings in their shop.

Becoming a Christmas Savings Club Agent

Whilst becoming an agent for a savings club or hamper company may seem like a good idea beware.  There is usually a minimum order value required before you can earn any commission.

 

For Park Hampers in 2017 – you will not earn any commission on orders under £550 and from there upwards your commission could be as little as 1% depending on the product you sell.  Variety Savings Club has a minimum of £1500 and from there upwards your commission is a maximum of 4%.

 

Not a lot of reward it seems for the hassle of finding customers, collecting and banking money and managing your agency

 

If you are thinking of saving for Christmas 2017, we would recommend opening a separate savings account which pays interest.  You can pay in as much or as little as you like, your money will be safe and you may even earn a small amount of interest on the money you put aside.

 

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Doorstep Loans – How Do They Work?

Doorstep Lending UK
Doorstep loans are a popular form of borrowing for those with poor credit and low incomes

With the media spotlight currently on payday lenders and the exorbitantly high interest rates they have been charging, today we are going to look at another form of short term lending, doorstep loans.  Doorstep loans are often marketed to customers who would not necessarily qualify for loans from other lenders, for example people who have low incomes, are disabled, on benefits or who have very bad credit.  Doorstep loans are sometimes known as home collected credit.

How Doorstep Loans Work

Doorstep loans are cash loans delivered to the borrower at home.  The doorstep lenders employ agents who visit customer at home, fill in the paperwork and issue the loan.  Repayments, which are usually made weekly are collected in cash directly from the customer at home.  These loans are usually repayable over 20 to 52 weeks and payments are usually fixed so you will pay back a defined amount each week which will not change.

 

doorstep loans from Morses Club

Affordability & Lending Criteria

Whilst doorstep lenders are usually not too concerned by bad credit history or previous defaults, one thing they must check by law is that the loan is affordable.  This means that they must check that you are able to afford the repayments along with any current commitments and that meeting the repayments will not cause you financial distress or hardship.

How Much Do Doorstep Loans Cost?

Doorstep loans are an expensive form of credit and interest rates can run to 80% or more.  The interest rate will vary depending on the lender and their rates must be transparent and clear.  Ensure you understand exactly how much interest will be charged and how much you will be paying back in total before you sign the paperwork.  Below is a typical example of how much a doorstep loan will cost from one lender.  Remember each lender has different interest rates and this is just a guide.

Loan Amount/Period : £200 repaid over 20 weeks
Interest Rate: 50%
APR 756.5%
Finance Charge: £100
Weekly Repayment: £15
Total Amount Payable: £300

Considerations Before Taking Out A Doorstep Loan

Unfortunately doorstep loans are still the most available form of credit for those on low incomes, on benefits, unemployed and people with poor credit.  Because they are repaid in weekly payments it is often tempting to ignore the total cost of credit in favour of convenience.

Doorstep loan agents are also salespeople, they are often put under a lot of pressure by their area managers to sell loans or lend additional funds to those who are already repaying loans.  Whilst the new UK regulations on payday lending and home collected credit have improved the situation somewhat, some agents still report they are under increasing pressure to meet quotas.

Consider Alternatives.

If you have bad credit, are on benefits or have a limited income, it can be very tempting to turn to doorstep lending but they may be alternatives.  Consider whether you could ask a friend or relative for help or check whether there is a credit union operating in your area.  The ABCU (The Association of British Credit Unions) have a list of all their member unions on their website.

If you are on income related benefits for over 26 weeks and need essential items such as furniture, clothing or help with moving, you may qualify for a Budgeting Loan from the Social Fund.  These are interest free loans which are paid back weekly.  For more info visit  https://www.gov.uk/budgeting-help-benefits/how-it-works

 

Ensure Your Lender is licensed

If a doorstep lender is not not licensed then he or she is a loan shark.  Only deal with reputable companies and check their license details on their website before you enter into any agreement.

Your Lender Must:

Leave you a copy of the paperwork.
Leave you a payment book which clearly shows the amount of the loan, your weekly repayments
and how much you have to pay back.
Inform you of your right to change your mind.
Do an affordability check on you before a loan is agreed.
Sign your repayment book or give you a receipt for each repayment you make.
Be fully licensed as a doorstep lender.

 

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