Christmas savings clubs warning

These are schemes which you pay cash into throughout the year. In return, you're given gift cards, or sometimes hampers, toys and so on, in time for Christmas.

Christmas savings clubs don't pay any interest on what you save. The gift cards or other items you get at the end of the year are usually the same value as what you've put in. But the schemes are marketed as a way of making sure you pay for Christmas in advance – essentially helping you to be a disciplined saver.

Big names which do this include Park Christmas Savings, Variety Christmas Savings Club and Intu Shopping Centres. It's a popular way to save – Park alone reckons it has 420,000 saving with it. Yet there can be real drawbacks, which we explain below. Crucially, if a firm were to go bust, your savings WOULDN'T BE protected by the official Financial Services Compensation Scheme (the FSCS – see more details below).

There are two other kinds of Christmas savings scheme which don't operate like this, and are outside the scope of this guide:

• Supermarket Christmas savings stamps. Like Christmas savings clubs, these aren't FSCS-protected, but they do pay up to 4% interest and as it's paid solely on what you've saved on a set date, it's possible to bag a year's interest in a day – see Supermarket Xmas Boost for how.
  
  
• Credit unions' Christmas clubs. These are completely different as they tend to be linked to an existing credit union account, which does have FSCS protection if anything goes wrong – see our Credit Unions guide for more info.

How do Christmas savings clubs work?

Savers normally join in the first few months of the year, and then get their gift cards or other items around October or November.

You have to choose what gift cards or other items to buy when you sign up, and then you make regular payments – for example, pay 25p a week for 40 weeks and you'll get a £10 voucher. With some you can choose how much and how often you pay, and you can pay in a variety of ways – from direct debit to PayPoint (which allows you to pay bills in shops).

You can usually sign up online, or some schemes use 'agents' who get their friends, family and neighbours to sign up. If you're an agent you can earn commission when you sell the gift cards (or sometimes even when you buy a large amount yourself). For example, one club gives you £10 commission if you sell £1,000 of gift cards (or buy them directly for yourself).