Credit Union Lotteries Bring the Thrill Back Into Saving

Author:     Tuesday, August 26, 2014 12:00 AM

In today’s highly competitive banking market, financial institutions are always seeking new ways to draw in customers. Some credit unions are now offering lottery-based accounts as a unique way to increase the mass appeal of saving money. Judging by the success of these early adaptors, they may have just found a winning combination.

Lottery Account Details

Savings account lotteries go by a variety of names, such as Save-to-Win or prize-linked accounts. Although the first of these accounts originated in the U.S in 2008, they have existed for decades in over 18 other countries. The first U.S. lottery savings account was created in Michigan as a way to increase participation of low income earners whose savings rates were low or non-existent. Since their creation, the savings participation of this group and higher income savers have both increased dramatically.

The requirement for entering the lottery is simply to open a savings account, or in some cases a CD, at a participating credit union. This act automatically places you into the pool to win a daily, monthly or annual lottery prize. Some credit unions go a step further by providing account holders with additional chances to win when they deposit more money into their accounts.

How Much Money Are We Talking?

The daily and monthly prizes for these accounts range from $25 up to several hundred dollars. However, the annual lottery drawing is where your savings really pay off, where pots can range from $10,000 to $25,000. Some credit unions divide up the annual prize into $5,000 increments to allow for more winners.

Participating States

Savings account lotteries are currently legal in Maryland, Rhode Island, Maine, Alaska, Georgia, New Mexico, Arizona, Michigan, Nebraska, Washington, Connecticut and North Carolina. While they are currently only allowed at credit unions, regulations are pending to expand these types of lotteries to traditional banks as well.

A Lottery That You Can’t Lose

Opening a lottery savings account makes sense for most people, as the lottery winnings are really just icing on the cake. Non-winners still have the money that they deposited into the accounts, plus the interest that accumulates. In addition, a study by the National Bureau of Economic Research revealed that most account owners saved more money than they had intended to, making it a great way to force yourself into saving. While rates on savings accounts are still low, lottery accounts provide an extra incentive that really pays off if you win.

Source: BFI