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Christmas Club accounts survive despite low interest

December 03, 1998|By KERRY LYNN FRALEY

Christmas Clubs were a hot product when Richard W. Phoebus Sr. started in the savings and loan business in the late 1950s.

Working at a small thrift in Baltimore, Phoebus remembers customers lining up to buy stamps - costing from 50 cents to $10 - that they'd attach weekly to their Christmas Club card.

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When the cards were filled, they could turn them in at any department store and get the value of the stamps in merchandise, he said.

The way Christmas Clubs work has changed a lot since their heyday in the 1940s, '50s and '60s, said Phoebus, now president of Home Federal Savings Bank in Hagerstown.

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Since the 1970s, many financial institutions have stopped offering the special savings accounts because of a decline in demand, according to John Bowers, executive vice president of the Maryland Bankers Association.

But they're still popular with area bank, thrift and credit union customers, their representatives say.

Christmas Club accounts are going strong at Hagerstown Trust, which has a little more than 3,100 such accounts in Washington County, said spokesman Dave Barnhart.

"Customers like them," said Barnhart, who said the bank has no plans to stop offering Christmas Club accounts as long as customers want them.

"Christmas Clubs are a tradition that a community bank is very happy to provide," he said.

The Christmas Club coupon books, which commit customers to a certain weekly deposit, are expensive to maintain, Barnhart said.

That's why the bank is trying to get customers to use an electronic funds method - either direct deposit from their payroll or an automatic draft from a checking or savings account - instead of a coupon book, he said.

Christmas Club accounts are as popular at Citizens National Bank in Berkeley Springs, W.Va., as they were when Huberta Shade joined the bank 28 1/2 years ago, she said.

Customers aren't using them just to save for Christmas presents, said Shade, a customer service representative.

Many people use them to save for taxes or large insurance premiums due at the end of the year, she said.

While a Christmas Club account earns the same interest as a regular savings account - now about 2.5 percent - it is different in several ways, Shade said.

At CNB, it can be opened with as little as $1, she said.

Unlike with a regular savings account, you can't make withdrawals, Shade said.

The entire account balance is sent out in check form in mid-October, she said.

People generally keep their accounts from year to year, said Shade, who has seen the saving method recommended from one generation of a family to the next.

"They know it's a good way to save. It's a sure thing. If they make the commitment every week or every month, they know it's going to be there for them," she said.

Christmas Club accounts remain popular with members of Bulldog Federal Credit Union in Hagerstown, said office clerk Sallie Pyle.

The accounts require no minimum balance and you receive a free gift when you open one, Pyle said.

First, you have to qualify as a member and open a regular savings account at the credit union, she said.

While perhaps not as popular as they were in simpler financial times, Christmas Club customers at Home Federal Savings Bank still like the accounts, Phoebus said.

The thrift has several hundred Christmas Club accounts, he said.

While Harris Savings Bank in Hagerstown continues to offer the accounts, they're not the hot item they used to be, said Linda Davis, community banking manager there.

"It's been a while since they've been a popular-type account," said Davis, who attributes the decline to lower interest and more credit.

At one time, people were getting 5 percent to 6 percent interest on their Christmas Club deposits, she said.

"Now you're lucky if you get 1 1/2 percent," Davis said.

Also, it's easier for people to get credit now than it used to be, she said.

A lot more people seem to use credit cards now instead of relying on Christmas Club savings for their holiday shopping, Davis said.

Like full-service gas stations, the special savings accounts have become a rarity with the proliferation of electronic banking and more financial products to choose from, according to Bowers, of the Maryland Bankers Association.

First National Bank of Maryland hasn't offered Christmas Club accounts for about five years, mainly because demand had declined, said spokeswoman Reese Nank.

Lower interest rates could have been partly to blame, she said.

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