There is a prize fund with a lottery-style monthly draw. It is quite easy to get your money in and out. What else is there to say?

Well, quite a lot, actually

Interest
The amount paid out in prizes is not a lottery but is precisely calculated. There is a published interest rate (currently - August 2005 - 3.25%). The prize fund each month is one twelth of this rate multiplied by the total number of premium bonds in the draw.

Interest is tax-free. 3.25% is equivalent to 5.4% for a higher rate taxpayer and 4.2% for a standard rate taxpayer.

With instant-access internet accounts at 5.0% this makes premium bonds worth considering for the higher rate taxpayer who does not mind gambling a bit with the interest. But pretty useless for everyone else.

There's just one good reason for buying

It's fun
Now you're talking! If you buy a thousand bonds then, on average, you'll win a prize every two years, you'll win a major prize (£5,000 and up) every 14,000 years and your fun will be costing you £1 per monthly draw in lost interest. If that turns you on, good luck!

But here is some irrational bahaviour you should avoid:

The experience illusion (1)
People buy more bonds if they have won a few prizes - thinking they are on a hot streak.

But only the published interest rate affects their future prospects. 'The computer doesn't remember'.

The experience illusion (2)
People keep records of their win percentage. They buy more bonds if it's good. See above.

"It's my turn"
People buy more bonds if they haven't won for a while. See above.

"My numbers are bad"
People will 'change their numbers' - sell and repurchase - if they don't win. This is particularly stupid because they miss a draw that way.