It's beginning to look a lot like Christmas for the millions of slow-but-steady savers who, for the past year, have been building a multibillion-dollar Christmas Club nest egg at their banks, credit unions and savings and loans.
Although their appeal has been dulled by a wave of newer savings-related bank and thrift products, the venerable savings program that was introduced in 1910 has survived and, in some instances, continues to prosper.
During 1984, 23 million patient savers pulled $6 billion out of Christmas Club accounts at banks, thrifts and credit unions across the country, according to a survey conducted for Christmas Club A Corp., the Easton, Pa.-based firm that in 1910 formed the first Christmas Club program. (The awkward company name came about because "somebody goofed" many years ago and failed to copyright the "Christmas Club" name, according to Vice President John Roberts.)
A Christmas Club's allure is simple, bank and thrift spokesmen agreed: A small segment of the public remains willing to trade higher interest rates for a simple and single-minded savings program that forces them to stash money away for the future.
During 1984, California banks accounted for three of the largest Christmas Club programs. Bank of America, Chemical Bank and Security Pacific wrote year-end Christmas Club checks totaling $203.3 million that year, according to American Banker magazine.
Christmas Club accounts, however, are not get-rich-quick schemes. In 1984, accounts averaged less than $300, including interest, Roberts said. And, Christmas Club interest rates usually mirror the 5% to 5 1/2% rate generated by passbook savings accounts. However, Christmas Club members do escape minimum deposit penalties.
Surprisingly, "The Christmas Club saver is not always some little old lady," Roberts said. "Our demographic research indicates that the age groups are pretty well spread out, as are the income groups."
Predictably, Christmas Clubs are most attractive to blue-collar families, especially in the Northeast and Midwest, and in a string of Southern and Central states including Louisiana, Mississippi, Alabama and Tennessee.
California banks have generated two of the nation's largest Christmas Club programs, even though relatively few of the state's banks and thrifts promote their clubs beyond putting up colorful posters in branch offices or mailing an occasional notice along with account balance statements.
Bank of America reported that 182,732 savers recently received checks for $96 million. Statewide, individual account balances averaged $527.
By contrast, in 1928, the first year that Bank of America offered its Christmas Club statewide, the bank paid $7 million--or an average of $50--to 140,000 members.
Security Pacific mailed $31.5 million in checks earlier this year to its 82,442 club members. The average pay-out was $383.
California First Bank's 11,785 Christmas Club members received checks for $5.2 million, with the average account holding $441.
San Diego Trust & Savings Bank mailed about 2,600 checks that averaged $300 to $400.
To pare back transaction costs, most institutions have forgone the seasonally decorated coupon booklets and mandated the use of electronic transfer mechanisms to transfer money from checking and saving accounts.
Despite those technological changes, Christmas Clubs remain "the bottom end of financial planning," suggested Michael Sterns, vice president of marketing for San Diego Trust & Savings Bank.
"The Christmas Club is a peculiar animal," said Aman Amiri, vice president of product management with Security Pacific, who said that "discipline," not interest rates, continues to prompt consumer interest.
"There seems to be a very loyal following," said Don Kinnaird, director of marketing for California First Bank. "We mailed our checks out on Oct. 31, and already some 3,000 customers have started up again for next year."
But Christmas spirit is not always the motivation.
"I use one to pay off property taxes," said Bank of America Vice President Thad Peterson. "It's admittedly not a tremendous interest rate, but that's not the purpose."
Even though the Christmas Club plays a minor role in California First's product line, the bank is not likely to drop it, said Kinnaird, who added that, "Once in a while someone asks why we still have it . . . but you can't ignore special segments of the marketplace in this deregulated environment."
Those banks and thrifts that offer Christmas Clubs insist that their programs are profitable.
Although Sterns suggested that he could "easily . . . sit down and prove that (the Christmas Club is) not profitable" for San Diego Trust & Savings, he predicted that the program will survive.
"We're an old bank and this is an old program, and although this is definitely not a lucrative or important product . . . we encourage our customers to develop that kind of savings logic."
Nonetheless, some banks and thrifts have dropped the clubs.
"Our Santa Saver program bit the dust about two years ago," said Monica Wiley, a spokeswoman for San Diego-based Home Federal Savings & Loan. The club was cut because it was "too costly," and passbook accounts provide essentially the same service, Wiley said.
Great American Savings & Loan never had a Christmas Club because there was never much consumer demand, spokesman Kenneth Ulrich said.
The first Christmas Club was formed in 1910 when Herbert Rawl created a savings program for a bank in Carlisle, Pa., Roberts said. Despite the copyright blunder, the company remains the only company that will "sell and market the programs to banks around the country," Roberts said. "We'll come in and show you how to work a program so it will be profitable."
The privately held company, which generated 50% of its 1984 revenues from non-Christmas Club banking services, has found the Christmas Club affiliation to be a boon and a bane, Roberts said.
"We have to spend a bit of time explaining" what the company does, Roberts said, but "it isn't that silly of a name because it serves its purpose."