T-Mobile Money: A weird (but insured) way to earn 1% on your cash

And here’s the thing: You don’t need to be a T-Mobile customer

By David Enna, Tipswatch.com

Back in mid-February, my cellphone carrier T-Mobile sent me an intriguing email about what seemed to be a new service offering: T-Mobile Money, an FDIC-insured savings account that paid 4% on deposits up to $3,000 and 1% on all balances above $3,000.

Was there a catch? Of course there was a catch. To get the 4% “perk” you had to make at least one $200 deposit a month into the account, either through transfer or direct deposit. Plus, you had to be an existing T-Mobile customer. Since I was already a customer — of both the company’s excellent cellular service and the ill-fated TV streaming service — I jumped aboard. I opened an account. I deposited $3,000. Then I set up an automatic transfer of $200 a month into the account.

Bingo … I earned 4% on my initial investment for the partial month of February. This was so simple! This was so great! The requirement to make one $200 deposit a month was no barrier. I loved this!

Then … less than a month later came the bad news. T-Mobile was changing the terms for the 4% perk, effective March 31. The new terms were onerous: To earn 4% on the first $3,000, I had to make 10 purchases a month using the provided MasterCard debit card. And that meant “purchases,” not simply using the ATM card to withdraw cash. So the 4% perk was now useless to me. I rarely use a debit card for purchases (especially during a pandemic) and my credit cards already provide 1% cash back.

T-Mobile continued to advertise the old terms ($200 deposit a month) well into March. My initial reaction to all of this was to throw a fit, stomp my feet, and accuse T-Mobile of a “bait and switch.” This was happening at the same time T-Mobile was dissolving its TVision television streaming service, which I was using and actually liked. Grrrr!

Count to 10, Dave, and … calm down

After a bit of research, I realized that T-Mobile Money had actually launched in 2019 and so the change in the long-standing 4% perk couldn’t really be classified as a “bait and switch.” It was a “change in terms.” Throw out the 4% perk, and what remains? 1% on all deposits, with full FDIC insurance. Does that make sense as an investment? Yes, it does.

Once you retire, you get obsessive about hoarding some level of cash, even beyond the “emergency fund” recommendations of 6 months of expected spending. Having one or two years of “after tax” cash allows you to ignore stock market fluctuations and plan for vacations, big-ticket purchases, home repairs, etc., without needing to tap retirement funds or stock investments — incurring a tax consequence.

The problem right now is that you can earn next to nothing on cash in highly safe investments like bank CDs, short-term Treasurys and money-market accounts. The typical rate paid by your brokerage or bank account is something like 0.005%, if that. So T-Mobile Money’s offer of 1% in an FDIC-insured account is way more attractive.

Here’s a comparison of potential earnings for “cash-like” investments with very little risk, showing why this T-Mobile Money account stands out in a barren wasteland:

As the amount invested increases, the value of the 4% perk declines, because it only applies to the first $3,000. T-Mobile Money, paying 1% interest, easily outshines other very safe cash-like investments. So I stuck with it, and added funds to the account. Everything can be handled on the T-Mobile Money website, and through its excellent phone app.

Do you need to be a T-Mobile customer to open an account? No you don’t. The 4% perk is limited to existing T-Mobile customers, but everyone gets the 1% interest on all deposits.

Questions and answers about T-Mobile Money

Is the T-Mobile Money account FDIC insured?

Yes. The account is actually held at BankMobile, a division of Customers Bank. The FDIC certificate number is 34444. This means your deposits are insured by the Federal Deposit Insurance Corporation up to $250,000 per customer.

Can anyone sign up for a T-Mobile Money account?

The 4% interest up to $3,000 is only available to T-Mobile customers, but you don’t need a wireless plan with T-Mobile or Sprint to sign up for a T-Mobile Money account. To sign up for an account you must:

  • Be of legal age
  • Have a US government-issued ID or state-issued driver’s license/ID
  • Have a Social Security number
  • Have a street address within the U.S. and Puerto Rico, excluding other U.S. territories

What are the monthly fees?

There are no monthly fees or minimum balance fees, no overdraft fees, no transfer fees. For ATMs, there are no fees at 55,000+ in-network Allpoint ATMs worldwide and no T-Mobile Money out-of-network fees. However, customers may incur fees from ATM providers when using out-of-network ATMs or international ATMs.

How can I deposit money?

The business model seems to be set up around direct deposit of your paycheck or government payment and then use of the ATM card. So, direct deposit is allowed, and the website and app clearly show you your account number and routing number.

You cannot deposit checks at an ATM, but you can deposit them through the T-Mobile Money app on your phone, using the phone’s camera. Mobile check deposits are limited to $3,000 a day.

You can do bank transfers into T-Mobile Money in the app, but these are limited to $3,000 a day. However, you can also set up T-Mobile Money to receive an incoming deposit from your bank or brokerage. Then the amount can be higher, up to the bank or brokerage’s outgoing per day limit. (I have tested this and it works.)

Depositing a large amount of cash? Forget it. You’ll need a money order, check or direct transfer to make a deposit.

How can I withdraw money?

It’s a similar situation to depositing money. If you are initiating a withdrawal from inside the T-Mobile Money app or website, you are limited to withdrawing $3,000 a day. But if you initiate the withdrawal from an outside source (such as your bank or brokerage connected to T-Mobile Money) you are only subject to that account’s incoming limits.

So, advice: Make sure to set up both an incoming connection to your outside account on the T-Mobile Money site ($3,000 limit in or out per day) and also a incoming/outgoing connection to T-Mobile Money from your bank or brokerage account (probably a higher limit, set by your bank or brokerage, not T-Mobile Money.)

How long does it take for deposited money to show up in your available balance?

External transfers in take 2 to 4 business days to be available. Incoming wire transfers are available on the same day they arrive. T-Mobile Money says payroll-related direct deposits can be available up to 2 days early.

Can I open a savings account instead of a checking account?

No.

Can I open an joint account?

T-Mobile says: “Joint accounts are currently unavailable. Only one account may be opened per person.” There is also no apparent way to name a beneficiary for the account. This could be a major drawback from some investors.

Does T-Mobile Money provide free checks?

No. The online account sends you to Vistaprint so you can order your own checks, at a cost ranging from 10 cents to 16 cents per check. However, T-Mobile Money does provide three free checks when it sends you your initial ATM debit card.

Does T-Mobile Money rebate ATM fees?

T-Mobile says: “If you use an out-of-network ATM, we won’t charge you, but the ATM owner probably will, and we aren’t able to rebate those fees.”

Can you get T-Mobile Money support at a T-Mobile store?

No.

How does T-Money make sense as a business?

T-Mobile says: “We expect to see revenues from merchant transaction fees when a customer pays with their T-Mobile Money MasterCard debit card. Over time, we expect to see additional operational benefits in our core business in increased customer retention and reductions in payment expenses.”

Conclusion

Despite my disappointment with the bait-and-switch … er … “change in terms” for the 4% perk, I think earning 1% in an FDIC-insured account is attractive in our current market conditions. That’s probably nearly 100 times what your bank or brokerage cash account is paying, and about double the yield of the best-in-nation online savings accounts.

There are times I feel like a T-Mobile beta-tester (the TVision streaming service was an unfortunate example), but in this case, at least so far, T-Mobile Money seems to be a solid product.

If the terms change, or interest rates elsewhere improve greatly, my deposits are always available to invest elsewhere.

Posted in Bank CDs, Cash alternatives, Retirement | 6 Comments

All of a sudden, inflation is a ‘thing’

By David Enna, Tipswatch.com

I’ve been writing about inflation and inflation-protected investments for 10 years, and most of that time, actual U.S. inflation has been sleepy and dull. Suddenly, but not too surprisingly, that has changed.

Official U.S. inflation — measured by CPI-U, the Consumer Price Index for All Urban Consumers — rose at unexpectedly high rates in March and April, well above consensus forecasts. And it looks like this could continue for several months. The result: Inflation is suddenly a very hot topic. And that actually is worrisome, because when workers begin “accepting” that future inflation will be high … wages will rise and accelerate the trend.

Google emails me a daily search alert for “Treasury Inflation-Protected Securities,” and most days in the past there would be no email at all, or an email with one or two slightly-related stories. Now, that list is booming to 12 to 15 stories a day.

So let’s take a look at what media are saying about inflation.

Wall Street Journal, May 23

The stakes are high for investors. Inflation dents the value of traditional government and corporate bonds because it reduces the purchasing power of their fixed interest payments. But it can also hurt stocks, analysts say, by pushing up interest rates and increasing input costs for companies. …

As of Friday, the yield on 10-year TIPS was minus 0.826%—meaning investors would lose money absent any inflation—compared with 1.629% for the nominal 10-year Treasury note. That means CPI growth would need to average at least 2.45% over the next 10 years for the inflation-protected security to pay as much or more than the nominal Treasury.

To some, this makes TIPS the safest and best inflation hedge. Investors are nearly guaranteed to get their principal back if they hold the bonds to maturity. At current yield differentials, they can earn significantly more than regular Treasurys if inflation fears are realized.

Still, TIPS returns are likely to be paltry under almost any scenario, particularly if inflation comes below expectations.

Yahoo! Finance, May 21

About one in three U.S. adults say they’re spending more on groceries than they were at the start of 2021, according to a Morning Consult survey of 2,200 U.S. adults conducted May 17 to 19 for Bloomberg News. Red meat was the ingredient cited most often for its higher prices, with chicken right behind.

CNBC, May 21

“In general, inflation is usually negative for stocks,” said Amy Arnott, a portfolio strategist at Morningstar. She pointed to history as proof: Between 1973 and 1981, inflation rose by more than 9% a year. During the same period, stocks shed about 4% annually. …

Another good match for investors worried about inflation are Treasury Inflation Protected Securities, or TIPS, said CFP Nicholas Scheibner, a wealth management advisor at Baron Financial Group in Fair Lawn, New Jersey. These securities carry a similar risk as other fixed income investments, he said, but they add an adjusted principal amount if inflation increases.

E-piphany by Michael Ashton, May 20

The Federal Reserve has recently started to use the word “transitory” when describing inflation pressures in the U.S. economy. What they’re trying to indicate is that we shouldn’t worry, the pressures we are seeing right now will eventually pass. But that’s stupid. All inflation is transitory. …

Maybe what they mean is that “these price changes we are seeing are all the results of supply and demand imbalances in nominal space, so they’ll all reach equilibrium and inflation will go away.” If that’s so, then (a) they’re probably wrong, (b) that’s what inflation looks like anyway; it doesn’t manifest as smooth price changes across all goods at the same time, and (c) you still haven’t told me over what period it will take for this equilibrium to occur.

New York Times, May 20

It is too soon to show up clearly in the data, but there are anecdotes aplenty that companies are rapidly increasing pay. Just this week, Bank of America said it would start a $25-per-hour minimum wage by 2025, up from $20, and major chains like McDonald’s, Starbucks and Chipotle have announced significant moves toward higher pay in recent weeks.

Associated Press, May 20

Many economists, as well as the Federal Reserve, say not to worry about any of this. They’re convinced these fast price gains will prove fleeting. If the experts are wrong, however — remember last month’s jobs data, where economists’ predictions were wildly off the mark? — it could ravage the economy and force the Fed to reverse its record-low interest rate policy and trim the bond purchases that are boosting markets. … (B)e prepared to experience even more swings in the stock market as Wall Street’s biggest question waits even longer to be answered.

Barron’s, May 17

For business owners and consumers on the ground, official inflation data and policy makers’ commentary are an alternate reality. Inflation is here, say grocery shoppers, home buyers, manufacturers, and retailers who insist that their dollars are buying less. …

The gap between reported price inflation and the experiences of businesses and consumers is a signal to investors that inflation is hotter than it looks. Implications of the disconnect are vast, affecting Social Security payments, tax-bracket adjustments, and economic growth calculations, in addition to investment returns, inflation expectations, and interest rates.

“All you have to do is open up your eyes to see there is inflation pressure everywhere,” says Ed Yardeni, president of Yardeni Research. “We are in stimulus shock.”

MarketWatch, May 12

The Fed has been hit by two major data surprises. Last Friday’s weaker-than-expected April job report and Wednesday’s hotter-than-expected April consumer prices. …

As the economy reopens, “we could have more persistent imbalances between aggregate demand and supply that would put more persistent upward pressure on inflation than we and outside forecasts expect,” (Federal Reserve Vice Chairman Richard) Clarida said Wednesday after the inflation data was published.

“I expect inflation to return to – or perhaps run somewhat above – our 2% longer-run goal in 2022 and 2023,” he said.

Final thoughts

I was at a dinner party recently (with fully vaccinated friends) and the topic turned to cooking and shopping in general. I asked the group: “Do you think prices are rising much faster right now?” The immediate reaction was a loud “YES,” across the board, with people giving examples of the price of onions, meat, lumber, used cars, housing.

Consumers have been noticing higher inflation for months. In May, the U.S. media also noticed. The overall effect is that “inflation consciousness” is seeping into the U.S. economy. This trend will continue for several months, but could dwindle later in the year. Or not. We’ll see.

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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. The investments he discusses can purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Inflation | 11 Comments