It seems that there are legal gambling promotions at USA Banks. Could these games of chance be a way to get people to save more?
Set in the Blue Ridge Mountains, and home to almost 5,000 people is the town of Luray, Virginia. Here you will find the Blue Ridge Bank which looks perfectly normal from the outside. Inside is a different story and we have discovered that this bank is now in the gambling business.
It is the first bank in the United States to take advantage of a new law that allows banks to offer cash prizes to their depositors. The idea behind this is to encourage saving and to make it more fun. The more you save, the greater your chances of winning cash jackpots. This is an extra incentive for low-income families so that they will be encouraged to put money into an emergency fund at the bank rather than purchasing lottery tickets.
The UK has been issuing premium bonds since the 1950's where people have a chance to win a million pound jackpot. An experiment that was conducted in a bank in South Africa 10 years ago boosted their customers' saving by 38 percent.
D2D Fund is a non-profit group that are focused on creating savings tools for low income groups and they have been pushing this idea in the United States. They began their "prize-linked savings" accounts at credit unions as they were able to take advantage of a loophole in federal laws that allowed contests to be held. They also lobbied legislators to undo federal and state laws that banned cash giveaways by banks. The American Savings Promotion Act was signed by President Barack Obama on the 18th of December 2014 and a chance in Virginia law came into effect in July 2015.
Brian Plum, President of the Blue Ridge Bank has read about the concept and he was eager to get it working in his bank. He saw it as a way to help his customers as well as attract new customers. Each month the bank has a draw in which there are five prizes. The top winner gets $200 and four others receive $50. At the end of the year a draw for a jackpot of $5000 will be held. Customers receive one draw entry every time their account balance increases by $25. To encourage even more savings that bank only allows one withdrawal from a jackpot savings account per month. If customers withdraw more than once there is a $5 withdrawal fee.
According to Plum, the bank is helping people do something that makes sense and even if they don't win the jackpot, they end up with extra savings in their account. The average balance per jackpot savings account now stands at $1,300.
Plum went on to say that customers were a little confused at first because this is a really different product. Since July only about 60 jackpot savings accounts have been opened at Blue Ridge, but this gives those customers a better chance at winning. Plum is optimistic that these figures will increase dramatically once customer realize the value of such an account.
Timothy Flacke, executive director of the D2D Fund said that it typically takes a year or two for banks to respond to changes in the law so it make take comes banks and regulators a little longer than Blue Ridge to employ this concept. He also went on to say that a lot of banks aren't aware of it. This is changing however, and according to Plum he has been receiving calls from banks in other states that are interested in trying out this concept. More and more states are also following the government's lead by ending their bans on bank jackpots with Oregon, Illinois, and Minnesota being the latest.
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