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Getting ready for Christmas

"Christmas Club accounts are now largely a thing of the past (undercut by the rise of easy credit)..." — so I wrote in the current issue of the Sound Mind Investing newsletter in an article on multiple savings accounts (subscribers' link).

That's true — Christmas Clubs have faded into the past for the most part.

But a reversal may be in the offing. Sears/Kmart promoted a Christmas Club program last year. Now, the New York Times reports another major retailer is rolling out such a club for this year:

Toys "R" Us is counting on an Eisenhower-era tactic to get consumers to spend this Christmas. The toy retailer will begin offering a "Christmas Savers Club" [this week] that allows shoppers to put money away with the company for holiday gifts.

Participants will receive a card similar to a gift card, and can contribute funds to it through cash or credit card payments. As an incentive Toys "R" Us will add 3 percent interest on the balance.

The program is a throwback to what banks and credit unions offered in the 1950s and 1960s before credit cards allowed people to spend money they did not have.

Our Level 2 article focused on Christmas Clubs run by banks, but many retailers had them too back in the day — to build customer loyalty, of course. That's exactly what Toys "R" Us is going for.

Shoppers can sign up for the program in Toys "R" Us stores, either at the cash register or the customer service stand. The company will add the interest on the balance as of Oct. 16, and the funds will be available Oct. 31 for purchases at Toys "R" Us and Babies "R" Us stores and Web sites.

Earning 3% is nothing to sneeze at these days, but unless you are absolutely, positively planning to buy something from Toys "R" Us — and you know exactly how much you're going to spend — it's probably better to set aside your Christmas savings in an earmarked bank account.

Earlier this week, I talked about the benefits of having multiple earmarked accounts with host Bob Crittenden on Faith Radio's Faith Meeting House program. Listen below (13 min.) — or download an mp3 (right click/save as).

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