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T-Mobile Money is Changing How Customers Earn Their 4% APY

The downside of trying and keeping up with a lot of personal finance products is that I often find myself being disappointed when tools I love either die or make major changes. This has happened more than a few times now, with victims ranging from credit cards to apps to banking accounts. In fact, the latest example falls into the lattermost category as T-Mobile Money has just announced a shift in strategy that will impact how accountholders earn their coveted 4% APY.

In an email sent to customers this morning, T-Mobile Money explained some changes to the account that will take effect on March 31st, 2021. First, in order for account holders to earn the 4% APY on balances up to $3,000, they’ll now need to make at least 10 qualifying purchases with their T-Mobile Money debit card. Previously, this rate was unlocked by depositing at least $200 per month into their account, so this is quite a switch.

Similarly, according to the email, “If you have Got Your Back overdraft protection when we make this change, you’ll keep it! Otherwise, eligible customers need to make 10 qualifying purchases in a single month to activate it.” That wording is a bit confusing but, since Got Your Back allows customers to overdraft their account by up to $50 with no fee as long as they bring their account back to positive territory within 30 days, I’m assuming this just means that account holders will still have their full 30 days to pay back the funds even if their owing period goes past this March 31st date — not that they’ll just indefinitely retain this coverage.

As for why these changes are being made, T-Mobile wrote, “We understand making a monthly deposit may be tough and we want T‑Mobile MONEY to work for you. So, we’re making it easier for eligible customers to earn 4.00% APY.” To be fair, that’s actually some decent reasoning and is likely true for most people. Unfortunately, in my case, it will likely make earning that 4% harder as I typically use credit cards for most purchases, not debit cards. Therefore, while moving $200 over each month was a snap for me, making sure to put 10 transactions on the card each month sounds like work. What’s more, if I really wanted to be strategic about it, I’d need to make these 10 purchases as small as possible to minimize the “opportunity cost” associated with not tapping my credit card rewards. That said, since I earn around $10 a month in interest from T-Mobile Money, it shouldn’t be too difficult to outpace what I’d earn in credit card cashback (basically, category multiples aside, I’d need to spend $1,000 on a credit card to earn the same $10 back).

Incidentally, this move actually reminds me of changes Aspiration previously made. Like T-Mobile Money, they too transformed their APY model from one based on savings amounts to one that rewarded spending (although, in that case, it was a set dollar amount instead of the number of transactions). While I hated that change and have continually been critical of Aspiration’s numerous business adjustments since, I’m actually more inclined to give T-Mobile a pass here — even if I’m disappointed. That’s partially because, even if I do end up missing the 4% APY opportunity, the account still pays 1% APY by default, which is better than most of my current accounts.

At the end of the day, while T-Mobile Money may have good intentions here and really does want to make this 4% APY more attainable for customers, the cynical side of me thinks that the interchange fees they’ll earn from debit card transactions are now just more attractive than any interest they’d earn from holding customer deposits. Thus, from a monetary standpoint, it makes more sense for them to pivot to this model. As for me, I’ll continue to hold money with them and at least attempt to rack up my 10 transactions per month come April. Will I be successful? I’ll keep you updated.

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