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Savings and investment app Chip has some of the best interest rates around at the moment.

Their Instant Access Savings Account* for example currently offers a healthy rate of 4.84% AER.

This is far above many high street banks, which is why it’s been on Money Talk’s Best Buy list for as long as I can remember.

Chip has another account that might be of interest to some savers: its Prize Savings Account*.

Relatively new to the market, it’s one of the many savings accounts with a prize draw element.

A year ago I saved £100 – here’s how it went.

How does the Chip Prize Savings Account work?

The Chip Prize Savings Account* sort of works like NS&I’s Premium Bonds.

You have to deposit a minimum of £100 into the account and maintain this balance throughout the month to be entered into the monthly prize draw.

For every £10 you save, you get one entry into the prize draw. So the more money you save, the more entries you get, and therefore the more chances you have of winning.

The maximum amount of money you can save is £85,000, which is the equivalent of 8,500 entries, and you’re only allowed one account.

The winners are randomly selected and you’ll be notified if you win.

How much can you win?

Each month there’s one big prize of £10,000.

In addition, there are 50 prizes worth £100, 100 prizes worth £50, 500 prizes worth £25 and 4,250 prizes worth £10.

Chip has actually increased the number of prizes available since it launched in September 2022 so your chances of winning have vastly improved.

It’s also possible to win more than one prize each month.

What are the odds of winning?

The odds of winning with a Chip Prize Savings Account* obviously depends on how much you have saved.

According to Chip’s calculations, you have a

  • 1 in 1,059 chance (0.1%) of winning something with every £10 entry.
  • 1 in 2.7 chance (37%) of winning something if your average balance is £5,000.
  • 1 in 1.6 chance (62.5) of winning something if your average balance is £10,000.
  • 1 in 1.19 chance (84%) of winning something if your average balance is £20,000.

These odds are calculated using data from August 2023, and will change from month to month depending on how many qualified entries there are.

For comparison, NS&I gives the odds for winning in Premium Bonds as 1 in 21,000 for every £1 saved. Again, this is variable.

Are there any downsides?

Like NS&I’s Premium Bonds, no interest is paid on the savings balance.

It means that if you don’t win anything, you’re basically losing money due to inflation.

That said, many of those in the financial independence, retire early (FIRE) movement uses Premium Bonds as a safe place to put their emergency fund – any prizes are tax-free – and there’s no reason not to use the Chip Prize Savings Account* in the same way.

Any money you deposit is protected by the Financial Services Compensation Scheme (FSCS) up to £85,000, hence why this is the maximum amount of money you’re allowed to deposit.

Another thing to bear in mind is that if you do win, the money is shown as “prize” on your account. It doesn’t become “money” until you cash it out.

That means prizes don’t count as additional entries into the prize draw, nor is it protected by FSCS.

In other words, if you’re lucky enough to win, cash out that money as soon as possible.

My experience with Chip Prize Savings Account

At the beginning of November last year, I saved £100 into the Chip Prize Savings Account* – the minimum amount you can save and still be entered into the draw.

Interest rates were still pretty mediocre at the time – at the beginning of November 2022, the Bank of England Bank Rate was still 2.25%, rising to 3% by the middle of that month.

It meant that after saving £100 for a year, I would only have earned about £3 in interest.

Happily, my investment into Chip Prize Savings Account* turned out to be much more profitable.

After 12 months, I won a single prize of £25, or the equivalent of 25% return – much more than I’d have ever managed with a regular savings account.

It was a pleasant surprise – I never expected to win, and to be honest I had to double check it wasn’t a scam.

Final thoughts on the Chip Prize Savings Account

I think it’s quite telling that I’ve decided to reinvest my winnings into my Chip Prize Savings Account* rather than cash it out.

That said, I’m not planning to put any more money into the account.

Interest rates have almost doubled compared to what they were a year ago.

Although winning anything on my £100 investment would beat the returns from a typical savings account at current rates, I like the certainty of interest returns.

If I had so much cash that I’ve filled my ISA allowance for the year, I may just consider it as an alternative to a savings account.