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Premium Bonds offer returns to consumers primarily through a prize draw. When individuals invest in Premium Bonds, they are not earning interest in the traditional sense. Instead, their money is pooled together with other investors’ funds, and every month, a random prize draw takes place, where bondholders can win cash prizes. The prizes vary in amounts, from smaller sums to larger jackpots, and the odds of winning depend on the total number of bonds held. This unique method of providing returns is what differentiates Premium Bonds from standard savings accounts or investment products that offer guaranteed interest or dividends.

In contrast, guaranteed monthly payouts, fixed interest rewards, and consistent dividend payments reflect traditional financial instruments where investors can expect regular income from their investment, rather than relying on a lottery-style draw for potential winnings.