PLSA

Like to gamble but hate losing money? Try a Prize-Linked Savings Account

ByMr. Moneyface

 

Prize-linked savings accounts (PLSAs) are popular in quite a few countries like the UK, Brazil, Germany, and Japan.  The concept is pretty simple.  You save money by depositing it in a savings account or certificate of deposit.  The bank or credit union then randomly awards prizes to account holders.  The prizes may be small, like $25 or a $10 Amazon.com gift card.  Or they might be large, like $1,000 or even $10,000 or more.  Unlike buying lottery tickets or other types of gambling, no one loses money with prize-linked savings accounts.  The worst you are going to do is get your money back plus interest.

Who Offers PLSAs?

There are currently 20 states where it is legal to offer a prize-linked savings account.  Many of them were added in 2015 and 2016.  Right now, only credit unions are offering PLSAs, but expect some commercial banks to experiment with them in the future.  The states that currently have credit unions offering prize-linked savings accounts are: Connecticut, Illinois, Indiana, Michigan, Nebraska, New York, North Carolina, Oregon, South Carolina, Virginia, and Washington.  You need to meet credit union membership requirements to participate.

How Much Do You Need to Deposit?

The rules vary by credit union, but most of the credit unions use a company called CU Solutions Group to run their program.  Their program (called “Save to Win”) requires customers to open a 12 month share certificate (CD) with a $25 minimum deposit.  That earns you 1 entry.  You get an additional entry with every $25 deposit you make (up to 10 per month).  Prizes are awarded monthly, quarterly, and annually with the amounts of $25 to $1000.  For the states that allow for a multi-state program, there is also one annual prize of $5000.  Some individual credit unions offer additional prizes.

How Much Interest Do You Earn?

The amount of interest varies by credit union, but its going to be somewhat similar to national averages (but not as high as the top-paying Internet only banks).  For instance, Lake Trust Credit Union in Michigan offers a 1 year Save to Win CD with a 0.45% APY interest rate compounded monthly.  The minimum balance is $25, and you can earn up to 10 extra entries per month with each additional $25 deposit.  Monthly cash prizes to lucky winners are $25 to $100, and you have a chance to win extra quarterly prizes of up to $5000.  By comparison, the national average 1 year CD yield according to Bankrate.com was 0.31%.  The top yielding 1 year CDs with no minimums were Internet-only Capital One 360 with a 1.25% APY and Barclays with a 1.20% APY.  You can sometimes find a PLSA that yields close to the highest-yielding Internet banks.  Evansville Teachers Federal Credit Union offers a 1 year Save to Win CD with a 1.00% APY and offers prizes of up to $5000 per quarter.