What Are Prize-Linked Savings Accounts?

Saving money can be a great financial habit to develop but that’s not always easy when you’re a spender by nature. Opening a prize-linked savings account is something you might consider if you need a little extra motivation to save. Prize-linked savings accounts (PLSAs) offer an incentive to save, usually offering the opportunity to win a cash bonus or prize for making regular deposits. This type of account could be just what you are seeking if you need a little extra nudge to save.

Consider working with a financial advisor for advice on the best banking solutions.

What Is a Prize-Linked Savings Account?

A prize-linked savings account is a savings account that’s tied to some type of financial reward, usually a cash prize. When someone opens a prize-linked account, they can deposit money and earn interest on their balances. They also get a chance to win money by meeting certain requirements.

Prize-linked savings accounts can go by other names, including lottery-linked savings accounts or sweepstakes savings accounts. Regardless of the name, these accounts serve the same purpose of encouraging people to save money on a regular basis.

You’re more likely to find prize-linked savings accounts offered at credit unions, although it’s possible to find them at traditional banks or online banks, as well. In addition to savings accounts, some credit unions and banks offer prize-linked certificate of deposit (CD) accounts as well.

How Does a Prize-Linked Savings Account Work?

A prize-linked savings account works similarly to a regular savings account in that you can open your account, deposit money and earn interest. The difference between prize-linked accounts and other savings accounts is that you also have a chance to win money by making deposits.

The amount of money that you can win depends on what type of account you open. There are typically minimum requirements you need to meet to have a chance at winning money. For example, you might need to make a $25 deposit each month for 12 consecutive months to be eligible for a $1,000 prize.

If you win money through prize-linked account sweepstakes or lottery, that money is usually deposited straight into your account. Keep in mind that you’ll need to report that money on your taxes.

Examples of Prize-Linked Savings Accounts

There are some common types of prize-linked savings accounts.:

Save to Win: Save to Win is a prize-linked account offered by a network of partner credit unions. When you open a Save to Win share certificate account with at least $25 and make regular deposits for 12 months, you can be entered into a monthly or quarterly drawing to win cash prizes of up to $5,000.
WINcentive Savings: If you live in Minnesota, you could open a WINcentive Savings account at participating credit unions. Every $25 you deposit to your account earns you an entry into a sweepstakes drawing. Drawings are held monthly, quarterly and annually, and you can earn up to four entries per month.
Saver’s Sweepstakes: Wisconsin savers who join participating credit unions and deposit at least $25 a month into their accounts can earn entries into monthly, quarterly and annual cash drawings through Saver’s Sweepstakes. Monthly winners can snag a $100 cash prize, while quarterly winners can receive $1,000 in cash.
Yotta Savings: Yotta is a personal finance app that offers weekly prizes ranging from $0.01 to $10 million to eligible savers. A $25 deposit earns an entry into the weekly drawing, and there are no fees as long as your account balance is $5 or more. Yotta offers FDIC-insured savings through its partner, Evolve Bank & Trust.
Big Prize Savings: America First Credit Union offers Big Prize Savings accounts. This prize-linked savings account offers a chance to win $1,000 monthly, $10,000 quarterly or $50,000 annually just for maintaining a balance of $500 or more every day.

Is a Prize-Linked Savings Account Worth It?

Prize-linked savings accounts have both pros and cons, so they might not be right for everyone.

The most obvious advantage is the opportunity to earn cash. Depending on where you’re saving money, you could have a shot at winning thousands of dollars in cash. It’s a great motivator to open an account and save regularly.

The downside, of course, is that there’s no guarantee that you’ll win. If you open a prize-linked account with the expectation that you’ll soon be on the receiving end of a large chunk of free money, you may be disappointed.

Of course, prize-linked accounts are not intended to be all about winning a prize. While that might be the driving reason some people choose to open them, these accounts are really designed to encourage people to get into the savings habit. So even if you don’t win, you’re still saving money and earning interest on your balances in the meantime.

If you’re considering this type of savings account, it’s important to research options. Specifically, you should make sure you understand:

How the sweepstakes or lottery works
Eligibility requirements
What kind of interest rate you will earn on savings
Whether any fees apply
Withdrawal rules and timing

You also need to familiarize yourself with membership requirements if you are planning to open a prize-linked account at a credit union. Credit unions can establish different requirements for membership based on where you live, work, attend school or worship. You may also be able to join based on military service or professional affiliations.

Are Prize-Linked Savings Accounts Safe?

Prize-linked savings accounts are generally safe, provided they are held at institutions that are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). This coverage protects your funds up to $250,000 per depositor, per insured institution. Before opening a prize-linked account, confirm the bank or credit union is federally insured. If the account is offered through a fintech platform, make sure funds are held at a partner institution with proper insurance.

The prize component does not affect the safety of your deposits. It operates separately from your savings balance and is usually funded by the institution itself or through a partner. Your chance of winning a prize does not reduce your principal or earned interest. However, the interest rate on prize-linked accounts may be lower than what you’d find in a high-yield savings account, as part of the value is shifted to the prize pool.

Some prize-linked accounts may have rules that affect liquidity. For example, they might require minimum monthly deposits or restrict withdrawals during certain periods. It’s important to read the account terms carefully, including how and when prizes are awarded, what fees may apply and whether there are penalties for early withdrawals.

Understanding these details can help you determine whether a prize-linked account is both safe and suitable for your financial goals.

Prize-Linked Savings Account Alternatives

If you’re not sure a prize-linked savings account is right for you or you don’t qualify to join a credit union that’s offering one, you’re not shut out of saving.

There are other ways to save while earning an excellent rate:

In terms of the best rates on these accounts, online banks tend to trump traditional banks or credit unions. Online banks often have lower overhead costs, allowing them to pass on the higher rates to savers. They can also charge fewer fees to open and maintain savings accounts, so it’s worth researching the best online banks to see what’s available.

Bottom Line

A couple ask their advisor about a prize linked savings account.

Prize-linked savings accounts are not a typical way to save, although they may hold appeal for people wanting a chance to win some extra cash. Considering your savings goals can help you decide if a prize-linked account is the best fit for your situation. If you are not sure, you can always consult with a financial advisor and create the right banking strategy to help you reach your financial goals.

Tips for Banking

Consider talking to your financial advisor about prize-linked accounts and whether they’re something you should consider. If you don’t have a financial advisor yet finding one doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
CD accounts can be a terrific way to save for mid to long-term goals. With a CD, you deposit money which earns interest over a set maturity term. Once the CD matures, you can roll it over to a new CD or withdraw the principal and interest. Creating a CD ladder of multiple CDs with varying terms is something you might consider if you want to capitalize on rising interest rates over time, while still allowing for flexible access to your money.