T-Mobile is jumping into the banking business with a splash.
The wireless carrier on Thursday introduced a mobile checking account that offers an interest rate thousands of times higher than the national average.
Called T-Mobile Money, the new service has no minimum balance requirements and no monthly, overdraft, transfer or late-payment fees. It also offers a potential 4% interest rate on balances up to $3,000 – compared with the industry average of 0.06%. After that, the rate is 1%.
T-Mobile is partnering with BankMobile, a division of Pennsylvania-based Customers Bank, on the new service. The move comes after the self-proclaimed “un-carrier” recently announced plans to also take on home television and home broadband.
“We don’t want to be a bank, we don’t aspire to be a bank,” Tiffany Minor, director of marketing for T-Mobile’s financial services business, tells USA TODAY. Minor says that BankMobile is handling “all the compliance” while T-Mobile is “delivering the customer experience in the wireless space.”
Minor says in their discovery phase the two companies discovered that consumers “weren’t getting anything” for their checking accounts, prompting them to create this venture and offer the 4% rate for T-Mobile customers.
“Whatever your acumen level is — financially aware, financially astute — you’re like ‘nobody offers that.'”
T-Mobile Money details
The checking account is available to everyone, not just to T-Mobile’s customers.
But the 4% rate and other perks are reserved for subscribers of one the carrier’s postpaid plans, such as T-Mobile One or Simple Choice. Banking customers also must deposit at least $200 into the account every month to get the 4% rate.
That higher rate equals an extra $120-a-year return on the $3,000. That’s not a lot, but for a family of three, that would currently cover a month of phone service on the T-Mobile One plan.
For non-customers and those on prepaid plans, the rate is 1% on the checking account balance, still nearly four times the average rate. Interest on the money is paid out monthly.
It is currently unclear what will happen for Sprint users if T-Mobile’s planned $26 billion merger with the carrier goes through.
T-Mobile Money users have access to 55,000 free ATMs that are part of Allpoint’s worldwide network that BankMobile uses. A locator can be found in the app.
The checking service also will spot you up to $50 for one month if you overdraw your account – called “Got your back.” You must pay back the overdrawn amount within 30 days or risk losing the feature. It is also available only to postpaid T-Mobile wireless customers.
Other perks include a simplified to process to set up direct deposit, integration with Venmo, PayPal and the Cash app, and a handful of paper starter checks. Users also receive a physical debit MasterCard.
Live customer support through BankMobile is available 24/7.
T-Mobile says that while you can use your T-Mobile Money debit card to pay your T-Mobile bill, the two accounts are not the same. Minor says there is a “total separation” between Money and regular T-Mobile.
“We don’t have transaction information, we don’t know what your balances are. T-Mobile doesn’t have visibility to any of your personal banking information… It is completely separate.”
Is T-Mobile checking worth it?
T-Mobile’s foray into checking follows many others’ attempts to break into the industry and lure customers from big banks by dangling no fees and higher interest rates on checking or savings accounts.
Like its predecessors, T-Mobile’s move is unlikely to persuade larger banks to rethink their checking and savings offerings. That’s because all bank have been experiencing huge growth in deposits in the past five years, says Ron Shevlin, a director of research at Cornerstone Advisor, a banking consulting firm.
“The big banks feel no pressure to raise interest rates when deposits keep coming in droves,” he says.
And while the 4% interest rate certainly distinguishes T-Mobile from the crowd, it may not necessarily be the best deal for consumers, Shevlin says. For instance, if your bank offers debit card rewards rather than a higher interest rate, you need to compare the two.
“If you’re running up $10,000 of debit card transactions and getting 1% to 2% back, that might be better than getting 4% back on $1,000 in balances you keep in your checking account,” Shevlin says.
Alternatively, if your checking account balance is typically low – say $300 to $400 – you’re not earning much from the interest. It might make more sense to compare banks on other features.
Latest expansion efforts
T-Mobile has been developing the program for two years, including a pilot it launched last year. The expansion into financial services comes at a busy time for the nation’s third-largest wireless provider.
In March, the company announced it would launch a pilot program in a bid to utilize its 4G LTE (and soon 5G) network to take on home broadband, while earlier this month T-Mobile said it would take on cable TV with its new TVision Home service.
All this comes as the company continues its push to complete its merger with Sprint. The companies may be encountering some government pushback. A recent report from The Wall Street Journal said Justice Department lawyers told the companies that the deal likely won’t be approved in its current structure.
In a tweet, T-Mobile CEO John Legere said the “premise” of the report was “untrue.”