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A Very Unmerry Christmas Club

Christmas Clubs aren’t known for their great rates. But we were still shocked to find a credit union in Chicago’s western suburbs that actually pays nothing at all.

Christmas Clubs aren't known for their great rates

Members who want to save for the holidays at NorthStar Credit Union earn 0% on balances below $1,000. (The return increases to 0.20% on balances above $1,000, which is more typical of what Christmas Clubs pay these days.)

So let’s say you contribute $100 a month beginning in January, and do so faithfully through October.

You’ll have the $1,000 you put into the account. And that’s it. Not a penny more.

This seemed such a shabby way to treat NorthStar’s members, we e-mailed CEO Lloyd Fredendall to ask why he was doing that.

His reply was frank — and depressing.

“As I am sure you are aware, the United States has been in an extended, essentially 0% interest rate environment for quite some time now,” Fredendall said.

Yeah, we’d heard about the Federal Reserve cutting the rate it expects banks to pay other banks for overnight deposits to a pittance almost 16 months ago.

“In addition, as I am also sure you are aware, loan demand at most institutions has been well below what was once considered normal in spite of record low rates on all loan types we offer.”

We’d heard about the recession, too.

As a result, Fredendall said, if NorthStar takes in more savings than the very limited amount it can lend, that money must be parked in overnight accounts that don’t pay enough interest to even cover the deposit insurance premiums.

“Clearly,” he concludes, “it would not be in best interest of our membership as a whole for us to hold deposits exceeding loan demand and reinvest them at a loss.”

And that, my friends, is the sorry plight of American savers.

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