Credit Unions Use Games to Encourage Saving

In today’s low-interest-rate environment, watching a pittance trickle into your savings account isn’t much encouragement to put more away. So some state-chartered credit unions are doling out prizes to get savers to deposit more money.

Prize-linked savings accounts are similar to traditional savings accounts. But each time you deposit a minimum amount -- say, $25 -- you are entered in a periodic drawing. Generally, a few people might win a prize as large as $10,000; many smaller prizes are in the range of $50 to $100.

You may pay a price to play the game. Most of the accounts earn interest, but you could earn less than you’d get otherwise, as credit unions may use the difference to help fund prizes. Some credit unions limit withdrawals or dock a portion of your accrued interest if you make one. The chance of winning depends on the number of entries, so it’s impossible to predict your potential return.

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The prizes convey the thrill of gambling without the risk. “The accounts appeal to the part of the brain that encourages action. They cause people to save in the long run,” says Stuart Butler, director of the Center for Policy Innovation.

Nine states currently allow prize-linked savings, and several more have legislation in the works. Congress is considering a bill to remove the barriers to such prizes on a national level. And if prize-linked accounts succeed in building savings rates, you might see programs backed by government bonds within a few years, says Butler.

Don’t have access to a prize-linked savings account? SaveUp.com allows users to link existing financial accounts to the site and earn entries to drawings for prizes from $100 gift cards to a $2 million jackpot.