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Guide to Prize-Linked Savings Accounts (PLSA)

By Jacqueline DeMarco · June 16, 2022 · 7 minute read

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Guide to Prize-Linked Savings Accounts (PLSA)

Everyone likes to win big. So what if saving money could make it possible to win more money? That actually is possible, thanks to prize-linked savings accounts that combine a normal savings account with a lottery-esque opportunity to win prize money.

Keep reading to learn:

•   How prize-linked savings accounts work.

•   The pros and cons of prize-linked savings accounts.

•   How to open a prize-linked savings account.

•   Alternatives to prize-linked savings accounts.

What Is a Prize-Linked Savings Account?

A prized-linked savings account is essentially a standard account, but it gives account holders the opportunity to win prizes. In addition to their presence in the U.S., they’re more common in other countries, including Germany, Argentina, and Japan.

The way that prize-linked savings accounts work is they allow account holders to enter raffles to earn cash prizes. If you have one of these prize accounts, how would you enter? By making deposits into a savings account, CD, or savings bond. Currently, these types of accounts are offered by financial institutions such as credit unions in 34 different states.

These savings accounts earn a nominal amount of interest and aren’t a solid replacement for a traditional savings account in the long run. However, they can be good for short-term savings. They’re designed to encourage people with low- or moderate-income levels to save more, which is a great thing.

Recommended: Checking Accounts vs. Savings Accounts: Key Differences to Know

Types of Prize-Linked Savings Accounts

To make it easier to understand how prize-linked savings accounts work, let’s look at a few real-life examples of these savings accounts that are available domestically.

Save to Win

The Save to Win pilot project allows credit unions to hold savings promotion raffles. (Banks or other financial institutions weren’t allowed to operate lotteries under this program.) Since 2009, Save to Win has awarded more than $1.4 million in prizes to more than 14,000 members in four states.

Lucky Savers

Since 2015, Lucky Savers has motivated New Yorkers to save by rewarding smart savings habits. This program was exclusive to credit unions and was formatted as a 12-month share certificate with unlimited deposit capabilities. Opening this account only required a $25 initial deposit. Then, for every $25 in month-over-month balance increase, account holders earned one entry into monthly and quarterly prize drawings.

WINcentive

WINcentive® Savings is another credit union-exclusive program. This program in Minnesota offers prize drawing entries for every $25 an account holder saves for up to four entries each month. Prize drawings occur monthly, quarterly, and annually. In 2012 alone, $100,000 in cash prizes were awarded to account holders.

Are Prize-Linked Savings Accounts (PLSAs) Legal?

Prize-linked savings accounts are legal in some states that have enacted legislation to allow these types of accounts. In response to concerns surrounding prize-linked savings programs, Congress passed the American Savings Promotion Act which authorizes banks and thrifts (a financial institution specializing in savings accounts and mortgages) to conduct savings promotion raffles. It also excludes these raffles from the prohibition against financial institutions dealing in lotteries.

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Pros of Opening a Prize-Linked Savings Account

Depending on your circumstances and financial goals, a prize account can offer a number of advantages. The pros of these savings accounts are:

•   Prize-linked savings accounts can incentivize individuals to save more money. Programs have found the amount of savers and savings amounts increase when there is a prize incentive.

•   It’s possible to win money that can help offset monthly expenses or can be large enough to be the equivalent of a small lottery prize.

•   It’s possible to win prize money without any of the normal risks that come with gambling or buying lottery tickets. The account holder gets to keep their savings whether they win a prize or not.

Cons of Opening a Prize-Linked Savings Account

Along with the benefits, there are disadvantages to prize-linked savings accounts. These include:

•   Prize-linked savings accounts earn little to no interest. The chance of winning money may not be worth forgoing a better interest rate with traditional or high-interest savings accounts.

•   Winning any prize money at all is not guaranteed and not predictable, like a steady stream of interest earnings is.

•   These prize-linked savings accounts are often cheaper for financial institutions to offer than traditional savings accounts with higher interest rates. For this reason, they might not promote what better savings options an account holder might have.

Opening a Prize-Linked Savings Account

If you want to open a prize-linked savings account, these are the steps you’ll generally take.

1.    Find a bank or credit union that offers prize-linked savings accounts. These accounts aren’t available in all states and are more commonly found at credit unions.

2.    Apply to open a prize-linked savings account. The applicant will usually need to provide two forms of identification during the application process.

3.    Make a deposit. Most prize-linked savings accounts have small initial minimum-deposit requirements.

Are There Taxes on PLSAs?

There are tax requirements surrounding prize-linked savings account winnings. Sure, you can go and spend money from your savings account that’s been plumped up thanks to a cash prize. However, anyone who wins money from one of these accounts should be prepared to pay taxes on their winnings according to state and federal laws.

Alternatives to a Prize-Linked Savings Account

Because there’s no guarantee that you will win any money with a prize-linked savings account, you may want to consider these other savings options that can offer a more guaranteed return.

•   High-yield savings accounts. High-yield savings accounts are simply normal savings accounts with high interest rates. Usually, high-yield savings accounts are found at online banks. Because online banks don’t have to spend a ton of money on brick-and-mortar banking locations, they are able to offer higher interest rates, lower fees, or other bank account bonuses. High-yield savings accounts allow consumers to take advantage of compound interest.

•   Money market account. Money market accounts tend to have a higher APY that normal savings accounts do, but they may have similar withdrawal limits to savings accounts. Check with your financial institution to see if there is a cap on the number of withdrawals you can make per month.

•   Certificate of deposit. A certificate of deposit (CD) has a minimum deposit requirement. It also has a set timeframe during which you can’t withdraw your money from the CD without having to pay a penalty fee. Usually, CDs have higher interest rates than both savings accounts and money market accounts.

The Takeaway

The potential to win prize money through a prize-linked savings account can make saving more appealing for some consumers. That being said, these accounts tend to have much lower interest rates than normal savings accounts, and there is no guarantee the account holder will ever win any money. Before opening one, carefully consider if a prize-linked savings account can meet your needs or if you would be better off with a different financial vehicle.

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FAQ

Are prize-linked savings accounts legal?

Yes, prize-linked savings accounts are legal in 34 states. Congress passed the American Savings Promotion Act in 2014, which authorizes banks and thrift banks to conduct savings promotion raffles.

Is a lottery account safe?

Lottery accounts are a safe way to save money. There is no actual gambling involved with a prize-linked savings account. Account holders get to keep all of their savings whether or not they win prize money.

How do I open a lottery account?

The process of opening a prize-linked savings account is the same as opening a normal savings account. Once someone finds a bank or credit union that offers this type of savings account, they will apply and provide all of the information and identifying documentation required during the application process. Then they will make an initial deposit.


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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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