Would you pay to enter a sweepstakes that it’s impossible to lose? Late last year, our representatives in Congress and the President all agreed on something, a bill called the American Savings Promotion Act. It made prize-linked savings accounts, something that serves as a combination lottery and savings vehicle, legal for United States banks.
We’ve covered this topic in the past, back in 2010 when a few credit unions were testing the concept in states that allowed it. Thanks to the change in federal law, prize-linked accounts are allowed at for-profit banks, and some banks are considering making them available to customers. (In some states, the only lottery that can legally operate is the government’s.)
Prize-linked savings accounts exist in other countries, and they’re rather popular. While everyone loves prizes, they’re aimed at a specific part of the population: lower-income people who have very little savings. Experts know that poor people are more likely to play the lottery, so why not incentivize people to stick money in a savings account by offering lottery-style prizes? Even if bank customers or credit union members don’t win any prize, they still have the money they saved and a tiny amount of interest earned.
The basic concept is that a small part of the interest that all of the savings accounts earn is kept aside for prizes, which are awarded to random account holders. In the Save to Win program, for example, each $25 certificate of deposit that an account holder has is considered an entry in the sweepstakes. Prizes aren’t exactly Powerball level, starting at $25 and topping out with one big annual prize of $10,000 awarded to a lucky account holder in North Carolina.
Banks awarding ‘lottery prizes’ for savings accounts [CNN]
Text of the American Savings Promotion Act [GovTrack]
by Laura Northrup via Consumerist
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