A bill designed to make operating prize-linked savings accounts easier for federally-insured financial institutions was introduced by members of Congress on Tuesday.
U.S. Senators Jerry Moran (R-Kan) and Sherrod Brown (D-Ohio) introduced the bill, called the American Savings Promotion Act, which advocates legislation that would let banks facilitate programs meant to make savings more alluring: In exchange for making deposits to a savings account, a customer could enter a raffle for a cash prize, for example.
The broad idea behind prize-linked savings accounts is to help promote savings and foster healthier financial habits.
Prize-linked accounts are proven to increase savings rates, which empower individuals to better endure financial strain and climb the economic ladder, said Sen. Moran in a release. By encouraging personal saving, PLS accounts keep money in the hands of families who need it most. While this innovative tool would offer the chance of big winnings, its real value is the promise of increased financial security for all Americans.
Companion legislation was introduced in the House of Representatives by Tom Cotton (R-Ark.), Niki Tsongas (D-Lowell) and Derek Kilmer (D-Wash.).
Technology such as customer analytics can help banks suggest appropriate savings goals for their customers.
SaveUp is one such startup that operates a savings rewards program for banks and credit unions. The startup is an offshoot from a Save to Win program, first piloted by several credit unions in 2009.
Currently, eight states have passed legislation allowing financial institutions to offer these programs. Meanwhile, a bill passed in 2012 allows credit unions and banks to offer prize-linked savings programs, if they are structured as a sweepstakes -- that leaves a loophole for non-savers to also have a chance at winning the drawing.