One normally thinks of banks as a safe haven for cash and not as a venue for gambling with your funds — literally. That’s changing a bit. As Bloomberg reported on Friday (Sept. 25), a small bank in Luray, Virginia, which is based in the Blue Ridge Mountains, has become the first bank in the United States to push cash prizes to depositors.
The cash payouts come as the small FI seeks, according to Bloomberg, to make saving money “a little more fun,” by offering monthly and yearly cash jackpots. That flips the lottery mentality, a hallmark of lower income people, and incentivizes them to earmark funds into a savings account rather than spending hard-earned wages on lottery tickets.
The U.S. is coming a bit late to the game with this novel tactic, as the United Kingdom has had similar incentives in place for the past several decades, in fact since the 1950s. This is in the form of “premium bonds,” which offer U.K. savers a chance to win a jackpot that can be as large as £1 million. The new cash rewards might catch on, as U.S. citizens have been saving money in the wake of the Great Recession.
Here in the U.S., the D2D Fund, a nonprofit group that aims to spur greater saving among low income demographics, has promoted its own initiatives to “prize-linked” accounts at credit unions that could, Bloomberg reported, come through a loophole in federal laws. At the same time, D2D has been lobbying to upend federal and state laws that ban such activity.
At Blue Ridge Bank, which boasts $260 million in assets, the savings “lottery” has a dual incentive of getting current customers to save more and also lure more deposits. The drawings have a $200 winner and four $50 winners every month, and at the end of the year, there is a single $5,000 jackpot drawing. The eligibility for the drawings is predicated on $25 deposits, which offer drawing entries. In order to boost savings, consumers are allowed only one free withdrawal from a “jackpot” designated account. Any more than that and they get hit with withdrawal penalties of $5 for each time they go beyond that single allowance. The bank has said the average balance in those accounts is roughly $1,300.
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