Missing Mega Millions mania? Try prize-linked savings to party on. Here's how they work

·4 min read

Miss the thrill of potentially winning the nearly $1.34 billion Mega Millions jackpot? Prize-linked savings accounts may just be the ticket.

Prize-linked savings accounts work like traditional savings accounts that pay a fixed interest rate on the money you deposit in your account. The difference is these accounts also let consumers earn entries into drawings for prizes, including cash ranging from less than a dollar to millions, simply by saving. Generally, the more you save, the more chances you get to win.

That’s what gives these accounts the lottery feeling, but you can’t lose. If you don’t win a lottery, often you’ve lost all the money you paid for the lottery tickets. Here, you pay nothing for the chance to win a prize so there’s nothing to lose.

These have existed for years, but have grown in number.

“These savings accounts not only have an element of fun attached to them, but more importantly, they encourage savings,” said Josh Roberts, vice president of system collaboration & development of Wisconsin Credit Union League, a nonprofit organization that supports Wisconsin credit unions, including the Saver’s Sweepstakes savings programs for their members.

Are prize-linked savings accounts legal?

Yes. The 2014 American Savings Promotion Act removed federal barriers that had prohibited financial institutions from offering prize-linked savings programs.

Prize-linked savings accounts are now available in 34 states. Since Wisconsin credit unions launched them in 2018, the total amount saved has grown to more than $31 million, spread across 14,290 accounts, Roberts said. The average balance is $2,174 and the median at $198, he said.

Walmart also offers people a chance each month to win one of 1,000 cash rewards in its Prize Savings Sweepstakes. Account holders can enter by transferring money from a Walmart MoneyCard account to a MoneyCard Savings account or anyone can request an entry by mail.

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Are prize-linked savings accounts insured?

Yes, the accounts are fully backed by the government. Up to $250,000 is insured by either Federal Deposit Insurance Corp or National Credit Union Share Insurance Fund, depending on what kind of institution holds your money.

Do people really win the big prizes?


Adam Moelis, online and mobile savings app Yotta co-founder and chief executive, estimates someone wins its $40,000 prize “every few months or so.” The odds are around 1 in 100 million per ticket, and most people get more than one ticket each week, he said. Yotta has more than 500,000 accounts and there are no fees with an account balance of more than $5, he said.

Crystal Doyley, an emergency medical technician from Long Island, New York, is living proof. Last year when the economy started to look shaky, she said she went to YouTube’s financial channels to learn about savings accounts that might help her earn more.

She saw a video about prize-linked savings with Yotta. Not only did savings accounts there pay a 0.2% interest rate, higher than the 0.1% national average, according to the FDIC, but every $25 she deposited would give her a ticket to the weekly prize drawing. So, she signed up last October.

“I thought, there’s no way I would win,” Doyley said. “I was just hoping to win $10 or so.”

The next month, she won a Tesla Model 3 or the cash value. She took the cash, which was $37,990 before taxes.

Every program differs in prizes and award amounts, drawings, and ticket limits per drawing. Carefully read program details.

Are winnings taxed?

Yes, you would get a 1099-INT and a 1099-MISC for anything over $600 for your prize-linked account winnings and report the prize on your tax returns, Roberts said.

That compares with lotteries, like Mega Millions, which issue Form W-2G to report as gambling winnings.

However, both sweepstakes and lottery winnings are taxed as ordinary income.

Who are these accounts good for?

These accounts can incentivize people who can’t save much or who aren’t great savers.

Three-quarters of Saver’s Sweepstakes holders are financially vulnerable, meaning they are low to middle income with no regular savings or few liquid assets, and 84% also have high debt or insufficient emergency funds, Roberts said.

In Wisconsin, minors can also have an account with someone at least 18 years old as a joint account holder, with permission from a parent or guardian, or in a custodial account.

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“What’s problematic with the lottery is people are losing a ton of money,” Moelis said. "Here, you don’t lose any money but still get the dream of winning $10 million.”

Ten million dollars is Yotta’s top prize, which Moelis says people have a 1 in 8 billion chance of winning. The recent $1.34 billion Mega Millions jackpot had odds of about 1 in 303 million.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

This article originally appeared on USA TODAY: Miss the Mega Millions jackpot? Try prized-linked savings accounts.