For nearly a century, USAA (full name: United Services Automobile Association) has offered an ever-growing suite of financial products to active-duty and retired members of the U.S. Armed Forces and their family members. According to its website, the San Antonio-based private organization was started, back in 1922, by 25 military officers who couldn’t find an insurance company willing to cover their vehicles.
Today, USAA hawks everything from brokerage and retirement accounts to flood insurance, through about a dozen subsidiaries. USAA itself – the parent company of these subsidiaries – is member-owned, structured under Texas law as an inter-insurance exchange. This is a cooperative model, as opposed to a traditional corporation. All members can purchase insurance through this structure. As a member who owns a slice of the company, you’re eligible to receive a share of USAA’s annual profits.
Because USAA has only 20 or so offices in North America and Europe (London and Frankfurt, Germany), USAA conducts most of its business online or over the phone. If you’re a member of the military or are part of a military family, USAA is for you – literally.
Eligibility: Who Can Join USAA?
Though USAA has changed a lot since the 1920s, it retains an unwavering focus on its original niche: service members and their families. Unfortunately, this means that huge swathes of the U.S. population don’t qualify for membership.
The following groups are eligible to join USAA:
- Active-Duty, Retired, and Honorably Separated Personnel. If you’re a current or former service member without a dishonorable discharge, you’re eligible for membership.
- Cadets and Midshipmen. This includes cadets and midshipmen at service academies and individuals participating in the ROTC program.
- Children of Members. Children of military personnel and their spouses can become USAA members.
- Current and Former Spouses of Military Personnel. If your spouse is eligible to join USAA, you are as well. This benefit continues after divorce or your spouse’s death.
What Can Nonmembers Get From USAA?
Even if you don’t quality for membership, you may be able to use some of USAA’s products and services, such as investment accounts, life insurance, and shopping discounts. However, other types of insurance, loans, banking products, and credit cards aren’t available to nonmembers. Since USAA’s policies regarding nonmembers are subject to change, it’s best to check with its website before attempting to purchase any of its products or services as a nonmember.
Personal Banking Products
- Checking Accounts. USAA offers two checking products: Secure Checking (free) and Secure Checking Plus ($9.95 per month). Secure Checking Plus has a $50 minimum deposit and comes with an ID theft protection and credit monitoring package from Experian. This includes a quarterly credit score and report, as well as financial reimbursement of up to $1 million in the event of an identity breach. Secure Checking has a $25 minimum opening deposit. Both offer free access to 60,000 partner ATMs and free, unlimited funds transfers to any account at another institution.
- Savings Accounts. USAA offers two free savings accounts: USAA Savings and Performance First. Savings has a minimum opening deposit of $25 and an interest rate range of 0.1% to 0.2%. Performance First has a minimum opening deposit of $10,000 and rates between 0.1% and 0.3%. Both offer free ATM access and bank account transfers.
- Credit Cards. In partnership with Visa, MasterCard, and American Express, USAA offers six credit cards. APRs range from about 6.9% to about 26%, depending on the card, your credit history, and current interest rates. Only one, a secured credit card, comes with an annual fee ($35). The American Express card comes with a cash back rewards program, while the Visa and MasterCard products come with travel and shopping rewards. The APRs on these four cards start at 10% and range to 26%. For a lower rate, look to the Rate Advantage MasterCard, which starts at 6.9% and ranges up to 24%.
- CDs. USAA offers three different types of CDs: fixed rate, variable rate, and adjustable rate. For the fixed rate, terms range from 30 days to seven years. Rates increase in proportion to the CD’s term and the amount invested, with Jumbo ($95,ooo to $174,999) and Super Jumbo ($175,000 and over) CDs boasting slightly higher yields. The variable rate CD comes with terms of 6 or 12 months, though the rate can vary based on fluctuations in prevailing consumer interest rates. However, USAA doesn’t say how the rate is recalculated or give a range that it can vary within. Finally, USAA’s adjustable rate CD comes with terms of three, four, five, and seven years, with rates ranging from .12% to .48% (depending on term length and CD size). If rates rise, you have the option to raise your CD’s rate once during its term.
- Traditional Brokerage Accounts. You can trade stocks, ETFs, options, mutual funds, and CDs in USAA’s traditional brokerage accounts, which come with no minimum opening deposit. Online trading commissions are normally $8.95 per trade (plus $0.75 per contract for options), but you can qualify for $5.95 trades (plus $0.75 per contract) if you’ve made more than 25 trades in the past 90 days or maintain total assets of $50,000 or more in your account.
- Retirement Accounts. USAA offers traditional and Roth IRAs, as well as SEP IRAs and SIMPLE IRAs. These come with the same commission and fee scale as USAA’s brokerage accounts. They also offer access to USAA’s annuities, mutual funds, and managed portfolios.
- Managed Portfolios. You can invest in eight managed portfolios through USAA, depending on your risk appetite. Portfolios range from “conservative” (20% stocks, 80% bonds) to “very aggressive” (100% stocks). The minimum investment for all managed portfolios is $25,000. If you invest $125,000 or less, your annual management fee will be 1.10%. Above that amount, it’s less, with the exact discount dependent on what you invest – for instance, 0.85% for total assets between $250,000 and $500,000.
- Mutual Funds. USAA administers dozens of its own mutual funds. These range from conservative options such as money market funds and short-term bond funds, to more aggressive options such as small cap stock funds and a fund that tracks the performance of the tech-heavy NASDAQ 100. On the conservative side, expense ratios tend to be less than 1% – for instance, the USAA Government Security Fund’s ratio is 0.41%. By contrast, the small cap stock fund has an expense ratio of 1.25%. You can buy USAA-administered funds through your brokerage or retirement accounts. You also have access to 6,000 funds from other issuers (such as Vanguard and T. Rowe Price) through those accounts.
- Trusts. USAA offers managed trust portfolios with a minimum size of $500,000. Their assets are professionally managed by an in-house trustee and distributed to your heirs upon your death.
- Annuities. USAA provides immediate and deferred annuities. In exchange for a one-time investment, the immediate annuity makes fixed monthly payouts for either a preselected period (such as 10 years) or the remainder of your life. The deferred annuities allow your money to grow tax-free until you retire. APYs on the deferred annuities range from 1% to 2.5%, depending on your location and the amount invested. USAA doesn’t offer specific rate information for the immediate annuities.
- 529 Accounts. USAA’s 529 savings accounts allow savings earmarked for higher educational expenses (such as tuition, room and board, and books and supplies) to grow without incurring a federal tax liability (if used for eligible expenses). The minimum opening deposit is $250, or $50 if you set up a recurring monthly deposit of at least $50. These products may not be available in all states, so it’s best to check with USAA first.
- Mortgage Loans. USAA offers home purchase and refinance mortgage loans. These come in five varieties: fixed rate, 5/1 adjustable rate (ARM), VA loans, FHA loans, and jumbo mortgages. All except the adjustable rate mortgage come with terms of 15 or 30 years (the 5/1 ARM is only available as a 30-year product). Rates range from Libor plus 2.5% on the 15-year VA loan, to Libor plus 4.75% on the 30-year fixed loan.
- Home Equity Loans. You can borrow against the value of your home with a USAA home equity line of credit. For lines between $25,000 (the minimum amount) and $75,000, rates range between Libor plus 4.25% and Libor plus 8.25%, depending on your credit score and whether you choose a fixed (higher starting rate) or variable rate. For lines of more than $75,000, rates range between Libor plus 4.25% and Libor plus 7.75%. Your line can be up to 80% of the value of your home. All USAA home equity lines of credit come with a five-year draw period, during which you can request funds and only pay back the accrued interest, and a 15-year repayment period, during which you must repay the borrowed amount in its entirety, plus interest.
- Auto Loans. USAA offers three types of auto loans: new car, used car, and refinance. New car loan APRs start at 1.39% and increase from there, with the exact rate depending on your credit history and your location (USAA doesn’t provide an upper range). Used car APRs start at 2.49% and increase from there. Both come with a 0.5% discount for those who use USAA’s Buying Service, which helps buyers locate and purchase vehicles. The company’s refinance loans start at 1.39% for cars less than two years old and 2.49% for cars older than that.
- Other Vehicle Loans. USAA also offers loans on RVs, boats, and motorcycles. Rates on these loans start around 4%, depending on the vehicle type, your credit history, and location.
- Personal Loans. USAA provides unsecured personal loans in amounts as low as $2,500. Rates start at 10% and go up from there, depending on your credit score and the amount of the loan. The company doesn’t provide an upper limit for its rates or principal amounts, but its lending standards get stricter as the principal increases.
- Auto Insurance. USAA offers auto insurance to members in all 50 U.S. states and some overseas jurisdictions (typically where the U.S. military has a presence). Perks of this product include a 15% discount for policyholders who store their vehicles on-base, and an installment payment option that can be tailored to military pay scales. For instance, officers-in-training may be able to defer some of their premiums until they earn their higher paying officer commissions.
- Other Vehicle Insurance. The company also offers insurance on other vehicles, including boats, RVs, motorcycles, planes, and classic cars.
- Home and Property Insurance. USAA offers several types of insurance for your home and property: homeowners’ insurance, renters insurance, and rental/investment property insurance (for landlords).
- Flood Insurance. Through a subsidiary, USAA General Indemnity Company, USAA offers flood insurance policies underwritten by the National Flood Insurance Program. There are two types of policies: Standard for homeowners in high-risk areas, and the lower-cost Preferred Risk for homeowners in low- to medium-risk areas. Both policies offer up to $250,000 in coverage for your home and up to $100,000 in coverage for the home’s contents.
- Life Insurance. USAA administers four different life insurance products: military term (for members of the military only), level term (for everyone else), universal life, and whole life. Both term life products come with terms of as little as 10 years and as long as 30 years. Premiums vary by age, location, and policy size. Both the universal and whole policies build cash value over time, which you can borrow against. Unlike most life insurance policies issued to civilians, USAA’s policies don’t limit or withhold death benefits in the event that the policyholder dies in a violent conflict. With a USAA policy, your payout is the same whether you die of natural causes or in a war zone.
- Health Insurance. The USAA Health Insurance Marketplace lets members choose from a variety of health, dental, vision, long-term care, and other policies offered by private insurance companies (such as Cigna) and the military’s TRICARE health insurance system. USAA doesn’t actually administer these plans itself, but its members may secure lower premiums on them due to the company’s negotiating power.
- Umbrella Insurance. USAA’s umbrella insurance policies offer additional protection for problems that might not be covered by other types of insurance, such as legal and judgment costs if you’re sued for libel or slander. The standard coverage amount is $1 million.
Other Products and Services
- Car Buying Services and Benefits. USAA’s website has a powerful car-finding feature, similar to what you’d find on AutoTrader or Cars.com, that lets you find your preferred vehicle make and model at a dealer in your area. USAA also has a network of USAA Preferred Dealers that offers special car-buying discounts (according to USAA, these range from $3,000 to $4,500 off MSRP for new cars). And if you buy a vehicle through one and then find a lower advertised price at another dealer within four days of purchase, USAA will refund the difference.
- Credit Monitoring and Identity Protection. Whether or not they have a financial account with the company, USAA members can purchase two different credit monitoring and ID protection packages: CreditCheck Monitoring ($5.95 per month, also included in Secure Premium Checking Account) and CreditCheck Monitoring Premium ($12.95 per month). The cheaper plan comes with one credit score and one report per month from Experian, while the more expensive plan offers the same frequency of scores and reports from Experian, TransUnion, and Equifax. (These plans are different than the quarterly Experian report and score package offered with the Secure Checking Plus bank account.) Both also offer historical reports and fraud investigation services.
- MoversAdvantage. USAA has a network of affiliated real estate agents called “USAA Preferred Agents.” As a member, you’re entitled to a cash back bonus when you close on a new home through one of these agents. This ranges from $350 on homes worth $100,000 or less, to $6,000 on homes worth $1 million or more.
- Shopping and Service Discounts. USAA offers discounts on products and services through partnerships with individual companies. For instance, members get special deals (USAA doesn’t specify how much) on home security systems with ADT, storage systems with PODS, and flowers with FTD.
Subscriber’s Account Distributions and Allocations
Every member who purchases a USAA insurance policy receives a Subscriber’s Account. Administered by the company’s board of directors, this account holds a portion of USAA’s capital reserves. This is a key feature of USAA’s legal structure: As a cooperative organization, every member literally owns a piece of the company, and the Subscriber’s Account represents that ownership.
Your Subscriber’s Account balance is proportional to the total amount of insurance premiums you’ve paid, with a percentage of each premium payment deposited into the account. The percentage is determined by the board of directors, may vary year to year, and isn’t public. This is USAA’s money, so you can’t withdraw it. But if the company turns a profit and meets financial performance goals set by the board of directors (variable from year to year), it may distribute a portion of your Subscriber’s Account balance to you (by paper check or direct deposit into your USAA bank account) in December of each year. The distribution amount varies from year to year and is based on the company’s financial performance, your account balance, and your lifetime premium payments.
Once you’ve been a member for 40 years, you become eligible for an additional Senior Bonus, payable in February of each year. The amount of this extra bonus is subject to the same conditions as the regular bonus.
1. Huge Range of Products and Services Under One Roof
Compared to many other financial institutions that do the bulk of their business online, USAA offers an impressive lineup of products and services: most types of insurance, brokerage and retirement accounts, checking and savings accounts, and several types of loans. It also offers value-added perks like rebates on auto and home purchases, discounts on other purchases, and ID theft protection.
With USAA, it’s possible to take care of most or all of you financial needs under one roof. By contrast, Capital One 360 offers lots of banking products and access to an online brokerage in Sharebuilder, but no loans or insurance products. Allstate provides a similarly comprehensive range of insurance products, but no banking or brokerage accounts.
2. Life Insurance Policies Don’t Include a War Clause
USAA life insurance policies don’t withhold or restrict death benefits for policyholders who die in war or violent conflict. If you’re an active-duty servicemember who dies in overseas fighting, your family will receive the same benefits as if you had died peacefully on U.S. soil. By contrast, most other life insurance issuers limit payouts in cases of conflict-related death. Active-duty servicemembers who face overseas deployment may have to pay higher premiums.
3. The Potential for Annual Profit Distributions to Members
In addition to rebates and discounts on auto and home insurance and other purchases, USAA returns capital to its members in other ways. When you buy an insurance policy from the company, you automatically receive a Subscriber’s Account that holds a portion of USAA’s capital. If the company meets the annual financial performance goals set by the board of directors, you’re entitled to receive an annual payout from this amount that could range from a few dollars to several hundred.
If you’ve been a member for more than 40 years, you’re entitled to an even juicier annual payout. Most traditional insurance companies, such as Allstate and Progressive, aren’t member-owned and thus don’t offer annual distributions to members.
4. Access to Flood Insurance
The FEMA-run National Flood Insurance Program (NFIP) underwrites all flood insurance policies issued in the United States, so many insurance companies (including powerhouses such as Allstate and Geico) don’t bother to offer their customers the opportunity to obtain flood insurance, instead directing them to NFIP. By contrast, USAA’s members can buy NFIP-underwritten policies directly through one of the company’s subsidiaries. This allows you to conduct all your insurance business through one insurer.
5. Trading Discounts Are Attractive
USAA offers attractive trading commission discounts for brokerage accountholders who trade often and in higher amounts. But they’re not prohibitive for people who aren’t made of money and don’t make multiple trades per day. With a discount of $3 per trade (to $5.95) when you make more than 25 trades in a 90-day period or carry an account balance of $50,000, USAA’s brokerage is a better deal than TD Ameritrade, E*TRADE, and other online brokerages with a similar range of offerings.
1. Many Products Aren’t Available to Nonmembers
Since it restricts membership to military personnel and qualifying family members, USAA’s full product lineup isn’t available to most Americans. As a nonmember, you may be eligible to open a brokerage account, purchase life insurance, and take advantage of its shopping discounts. But USAA reserves the right to close these services to nonmembers, so it’s best to check with the company before making a decision. Eligibility is much less restrictive at insurance providers and financial institutions that aren’t member-owned, such as Allstate and Capital One 360.
2. CD and Savings Rates Aren’t Competitive Relative to Other Online Banks
USAA’s CD and savings account rates tend to be on the low end, especially compared to online banks like Ally Bank and EverBank. Most rates on USAA’s CDs with multi-year terms range between 0.45% and 0.8%, and the highest available USAA CD yield is 1.11% on a seven-year Super Jumbo CD (which requires a $175,000 minimum deposit).
By contrast, Ally Bank offers an 18-month CD at about the same rate – and with no minimum deposit. Also, its five-year CD yields 2%.
3. Customer Service Is Cumbersome and Confusing
USAA has live customer service professionals, but reaching them can be tricky. Though there’s a main number – (210) 531-USAA – with a touch-tone menu to direct you to the right department, the sheer number of departments makes this time-consuming. So USAA advises you to call your desired division (IRAs, mortgage, auto loans, and so on) directly.
However, this requires you to look up the pertinent number in its online directory, which can also take time. And since its offices are closed on the weekend, calling on Monday can be stressful and time-consuming – so much so that USAA advises members to call Tuesday through Friday instead. By contrast, Ally Bank’s customer service team is available 24/7, by phone, often with wait times of just a few minutes.
Separately, USAA doesn’t have a live chat feature on its website – if you don’t want to call, you need to email a customer service professional and wait hours (or days, depending on volume) for a response. Ally and other online banks have live web chat.
4. Website Is Dense and Difficult to Navigate
USAA’s website is difficult to navigate, and its most important parts – including drop-down menus – are clogged with small text. This makes it difficult to use on a mobile device. Also, some of the site’s pages seem out of step with web browser navigation tools. For instance, when you click the back button from a sub-page, you may be taken all the way back to the home page, even if you hadn’t been there in some time.
Serving in the military is an honorable calling that demands tremendous sacrifice. If you’re an active-duty, retired, or honorably separated servicemember, or are related to someone who fits that bill, you may be eligible for membership in USAA. With perks that aren’t available through many other banks and insurance companies, there are plenty of reasons to join.
However, USAA isn’t for everyone, as only a handful of its products are available to nonmembers. And though the company has flirted with expanding eligibility requirements in the past, including a brief period when it welcomed employees of the FBI and other federal law enforcement agencies, it appears likely to prioritize its core constituency – the military – for the foreseeable future.
USAA has a wide range of insurance and financial products available online. It also offers support for members looking to save money on the purchase of a house, car, and various other services. But with restrictive eligibility requirements, it’s not an option for most Americans. And since you’re likely to do most of your business with USAA online, it would be nice if they invested more in the website, customer service, and other aspects of the user experience.
4.3 out of 5 stars (for eligible members): Comprehensive offerings and lots of support for car-, home-, and service-buyers are big pluses here. Poor website navigation and confusing customer service definitely hurt.
Have you had any experiences with USAA?