NEW YORK (9/3/14)--Through prize-linked savings (PLS) accounts, credit unions appear to have discovered a way to make saving fun and attractive, The New York Times wrote in an article that ran on its front page Sunday.
Prize-linked accounts "essentially treat every deposit as a ticket in a prizewinning raffle," the article's author said. "The idea is to offer the thrill" without the risk.
PLSs, which have been legalized in nine states across the country, have earned the acclaim, The New York Times wrote, of left-leaning poverty advocates and conservatives who like the private, market-based approach and emphasis on personal responsibility.
The programs work by offering credit union members a chance to win monthly and annual cash prizes each time they drop money in their savings accounts.
This way, even if the member doesn't win the cash prize at the end of the month or year, they still have built up their savings, plus interest, without risking any money.
One of the most popular PLS programs, Save to Win, which was developed in Michigan in 2009, has led to 50,000 accounts being created and $94 million being saved over the last five years, according to The New York Times.
Through Save to Win, members open a one-year certificate of deposit (CD), and for every $25 they deposit, they earn an entry into a monthly drawing.
"I didn't have $500 to start a CD, and when they said it was only $25, I knew I could do that," Cindi Campbell, who recently won a $30,000 year-end grand prize at Telco Community CU, Asheville, N.C., with $117 million in assets, told The New York Times.
Washington credit unions employing the Save to Win program recently reached the milestone of taking in more than $1 million in deposits after just one year of operation (News Now Aug. 21).
Nebraska, Michigan, North Carolina, Washington, Connecticut, Indiana, Maine, Maryland and Rhode Island have passed laws allowing credit unions to offer PLS programs, all with the help of their state credit union leagues.
New York likely will be the next on the list, as the state's Legislature recently approved its own law that now only awaits the signature of Gov. Andrew Cuomo.
A version of the article appeared in print on Sunday on page A1 of The New York Times. To read the online version, use the link.