Reader Question: Higher Interest Rates on Cash Without Internet Access or Cell Phone?

Here’s a reader question that I found interesting regarding “low-tech” retirees:

Hi – my 82 year-old father-in-law does not own a cell phone or a computer. He has very little “visibility” on the internet because he was a self-employed craftsman for the last 40 years. But he has money to invest, and it is sitting in a near-zero savings account. For the reasons listed above, he cannot qualify for any of the high-yield savings accounts that are out there. Their methods of identifying customers require a cell phone and some kind of documentable internet presence. Maybe he is an extreme example, but I am guessing there are others in similar situations. Any thoughts on how such a person can obtain a higher yield? Thanks.

I am empathetic to this problem as I am frequently helping older relatives navigate modern life without internet access. I’m also a fan of low-tech as a backup form of resilience and emergency preparedness. What would happen if the power went down for an extended period? What would happen if you passed away suddenly and nobody could figure out your passwords?

This question specifically addresses low interest rates on cash. It is not an accident that NONE of the three biggest banks by branch size (Bank of America, Chase, and Wells Fargo) offer a decent interest rate on their basic checking and savings accounts. (Even Citibank only offers their high-yield Accelerate savings account in states where they have no physical branches.) If they made it easy to sign up for a “high-yield savings account”, they would lose many millions in profit as all the offline folks would happily switch over their deposits earning 0.01% APY. My 94yo great-aunt will dilute her dish soap until it comes back on sale at the local grocery store. You can bet she would walk right into her local branch to sign up for a savings account paying 3% APY instead of 0.02% APY!

My first thought is that I would open an account with Fidelity Investments, as they have solid history as a traditional broker with a fully-staffed customer service phone line. Fidelity would still run just fine if there was only snail-mail envelopes and rotary phones. This Fidelity Core Positions page is a handy bookmark to see the current interest rates (screenshot below taken 11/18/2022) on the various options for your core position (default for uninvested cash). As you can see, the rates are quite competitive with online banks. Money market funds are not FDIC-insured, but they are very close (and even closer after recent regulations). I personally don’t lose a bit of sleep on my Fidelity money market funds and I also snail mail them large checks every year for my Solo 401k plan.

In addition, Fidelity has a decent branch network (“Investor Centers”) at major metro areas nationwide. Finally, Fidelity offers a solid inventory for brokered CDs and access to Treasury bills and bonds if you were willing to lock up your money for a higher rate.

Why don’t I include Vanguard? While Vanguard money market funds are excellent and usually pay even higher interest rates than Fidelity money market funds, I have heard far too many customer complaints about hour-long hold times for phone customer service. Vanguard also does not have a physical branch network. I try my best to only use Vanguard for simple index fund transactions and nothing complicated. Meanwhile, TD Ameritrade and Schwab do have some money market options and physical branches, but you must make every transaction manually while the default is a sad cash sweep program paying less than 0.50% APY. This is why I’d pick Fidelity over the others. (No, Fidelity did not pay me to say any of this. Unfortunately…)

Another option would be a local credit union that is looking for loan growth (which requires deposit growth) and thus is offering high interest rates. You would want to find one that has a physical branch in your area, and the best resource for this is DepositAccounts.com which allows you to search by zip code. Make sure to uncheck the “Web Only” box and check the “Local Branches” box.

This will hopefully let you find a physical branch nearby that will offer a decent rate. Oftentimes, the good rates only show up in certificates of deposit (which allow them to match maturities) but you could simply ladder even 1-year CDs over time to maintain a solid rate with decent liquidity. Many of the military-affiliated credit unions have a larger branch network and a history of competitive products, and some of them can be joined without military status. Good luck and thanks for helping others!