WASHINGTON -- A new type of savings account taps into the Powerball fantasies of Americans by giving customers the opportunity to win cash prizes every time they make a deposit.
Proponents of so-called "prize-linked" accounts hope the prospect of a no-lose game of chance -- account holders get to keep their money even if they don't hit the jackpot -- will entice Americans to save some of the $68 billion they spend on lottery tickets every year.
Marketed as special "Save to Win" certificates of deposit, prize-linked accounts already are available from 62 credit unions in Michigan, Nebraska, North Carolina and Washington state. But they aren't likely to become widely available nationwide unless members of Congress change federal laws that prohibit banks and thrifts from participating in lotteries or gambling.
Legislation introduced by Republican Sen. Jerry Moran of Kansas and Democratic Rep. Derek Kilmer of Washington state would tweak the laws in order to create a narrow exemption for prize-linked accounts. The change would clear the way for states to authorize federally chartered financial institutions to offer such products.
Supporters of The American Savings Promotion Act say it will encourage more financial stability among Americans, only a quarter of whom said they could come up with $2,000 in 30 days, according to a 2011 study.
In a rare show of cooperation on Capitol Hill, the bill has united lawmakers who don't often find themselves on the same side: In addition to Moran and Kilmer, co-sponsors include Rep. Tom Cotton, a Republican from Arkansas, Democratic Sen. Sherrod Brown of Ohio, and Elizabeth Warren, the liberal Democratic Massachusetts senator.
Moran said he sees prize-linked savings as a way to create stronger incentives for families to save, invest and navigate financial emergencies.
In his home state of Kansas, 32 percent of households do not have any savings account, and 34 percent are defined as being "liquid-asset poor," meaning they lack savings to cover basic expenses for three months in the event of unemployment, a medical emergency, a car wreck or other crises.
The bill "is one bipartisan strategy we can all support to encourage higher personal savings rates, which enable increased financial security and upward mobility," Moran said.