Prize-Linked Savings

Prize-linked savings programs give savings accountholders the opportunity to win prizes when they make deposits. In these programs, financial institutions offer consumers a savings product with a low minimum balance requirement. Accountholders then make monthly deposits, which qualifies them for monthly and/or annual drawings. The possibility of a prize encourages greater savings. Unlike gambling, however, no one loses from participation in a prize-linked savings program. Prize-linked savings programs focus on the entertainment value and fun of winning prizes, without risking any principle and by providing the knowledge that one is building an asset. Not everyone “wins” one of the prizes, but everyone comes out ahead with increased savings. State and federal laws can be an obstacle to the adoption of prize-linked savings programs. Federal law prohibits federal and state-chartered banks from engaging in “games of chance.” However, to enable prize-linked savings programs, states can change anti-gambling and gaming laws to allow credit unions to hold private lotteries.

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