For nearly a century, USAA (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 qualify 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 directly with USAA before attempting to purchase any of its products or services as a nonmember.
USAA’s Personal Banking Products
USAA offers two checking products:
- Classic Checking. Classic Checking has a $25 minimum opening deposit, no minimum ongoing balance, no monthly maintenance fee, surcharge-free access to tens of thousands of partner ATMs, unlimited funds transfers to any account at another institution, and 0.01% APY on balances above $1,000.
- Cashback Rewards Checking. Cashback Rewards Checking has a $25 minimum deposit, no minimum ongoing balance, no monthly maintenance fee, surcharge-free ATM access at partner ATMs, unlimited funds transfers, and a cash back program that earns $0.10 per debit card transaction (regardless of size).
USAA offers two free savings accounts:
- USAA Savings. Savings has a minimum opening deposit of $25 and an interest rate range of 0.09% to 0.15% APY, depending on your balance. ATM access and bank account transfers are free.
- Performance First. Performance First has a minimum opening deposit of $10,000 and yields between 0.05% and 1.16% APY, depending on your balance (the best yields are reserved for balances above $250,000). ATM access and bank account transfers are free.
USAA offers three different types of CDs:
- Fixed Rate. Terms range from 30 days to 7 years. Rates increase in proportion to the CD’s term, with the 30-day product yielding 0.22% APY and the 7-year product yielding 2.22% APY.
- Variable Rate. The variable rate CD comes with terms of 6 or 12 months. The yield is currently 0.46% APY for both products, though it’s subject to change 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, and it hasn’t changed for some time despite numerous changes in prevailing interest rates.
- Adjustable Rate. This CD comes with terms of 3, 4, 5, and 7 years. Yields range from .91% APY to 1.59% APY, depending on term length and CD size). If rates rise, you have the option to raise your CD’s rate once during its term.
USAA’s Investment Products
Traditional Brokerage Accounts (General Investing)
Stock trading commissions are normally $8.95 per trade. Options trades are $8.95 plus $0.75 per contract. Higher-volume traders may qualify for discounted commissions, but you’ll want to check with USAA for updated information.
USAA has dozens of no-transaction-fee funds. No-load transaction fee funds typically carry $45 commissions, so they’re not ideal for small-dollar investing.
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.
USAA’s taxable and tax-advantaged managed portfolios use automated investing technology to diversify and periodically rebalance clients’ investments across semi-customized baskets of ETFs. USAA builds portfolios based on clients’ stated risk tolerance, with higher-risk portfolios emphasizing stocks and lower-risk portfolios emphasizing fixed-income instruments.
Regardless of the asset mix, USAA’s management fee is a flat 0.50% on all balances. Individual funds held in portfolios may charge additional fees that push total expenses higher than 0.50%. There are no trading fees or commissions. The minimum investment is $2,000.
USAA offers several different managed account types:
- Individual or joint accounts (taxable)
- Individual retirement accounts (IRAs), including traditional IRAs and Roth IRAs
- Simplified Employee Pension (SEP) IRAs for self-employed individuals and small business owners
- Uniform Gifts to Minors (UGMA) or Uniform Transfers to Minors (UTMA) accounts for minor children
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%. Actively managed funds typically have expense ratios north of 1%. These expenses are subject to change over time. Most mutual funds require a $50 minimum investment and a monthly recurring $50 investment.
You can buy USAA-administered funds through your USAA traditional brokerage or tax-advantaged retirement accounts. You’ll have access to thousands of funds from other issuers (such as Vanguard and T. Rowe Price) through those accounts.
USAA provides immediate (Single Premium) and deferred annuities (Flexible Retirement and Extended Guarantee).
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, with no maintenance fees. The deferred annuities allow your money to grow tax-free until you retire, also with no maintenance fees. The minimum investment is $5,000 for the Flexible Retirement annuity and $20,000 for the Extended Guarantee annuity.
APYs on the deferred annuities range from 1.60% to 2.65%, depending on your location and the amount invested. USAA doesn’t offer specific rate information for the immediate annuities.
529 Accounts (Education Savings)
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.
USAA’s Loan Products
Terms range from 10 to 30 years, depending on the product type. Rates vary widely by product type but are generally competitive with other major lenders for the product type. They’re subject to change without warning, so it’s best to check with USAA early in the buying process.
USAA offers conventional and cash-out mortgage refinance loans, as well as VA IRRRL (VA streamline refinance loans). Rates are generally competitive with other major issuers. LTV limits apply, depending on the loan purpose and type.
For instance, a conventional refinance loan accommodates up to 95% LTV, while a cash-out refinance allows no more than 80% LTV. VA IRRRLs allow up to 100% LTV.
USAA offers three types of auto loans: new car, used car, and refinance. New car loan APRs start at 2.99% and increase from there. The exact rate depends on your credit history and your location. Used car APRs start at 3.49% and increase from there. USAA doesn’t provide an upper loan limit on either loan type.
Before you apply for a USAA auto loan, read up on how to determine whether to buy a new or used car.
Other Vehicle Loans
USAA also offers loans on RVs, boats, and motorcycles. Rates on these loans start between 5% and 6% APR, depending on the vehicle type, your credit history, and location, but are subject to change without warning.
USAA provides unsecured personal loans in amounts as low as $2,500. Rates range from 8.99% APR to 10.99% APR, 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. Terms range from 12 to 84 months.
USAA’s Insurance Products
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). It has a lot of the bells and whistles you’d find with other major insurers like Progressive and State Farm: accident forgiveness, safe driver discounts, family and bundle discounts, customer loyalty discounts, roadside assistance, and more.
Unique USAA auto insurance perks 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. Policyholders who bundle home and auto insurance can save 10% off their premiums.
Other Vehicle Insurance
The company also offers insurance on other vehicles, including boats, RVs, motorcycles, planes, and classic cars. Premiums and terms vary by vehicle type and policyholder.
Home and Property 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.
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 – a necessary move in light of its customer base. With a USAA policy, your payout is the same whether you die of natural causes or in a war zone.
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.
USAA also offers low-cost Health Expense Plans. They’re designed to cover catastrophic care and some preventive care expenses, but they may not meet minimum coverage requirements set forth in the Affordable Care Act. Still, for middle-income consumers, the savings may be worth incurring a tax penalty under the ACA.
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. Premiums start at $19 per month.
Other USAA Products and Services
Car Buying Services and Benefits
USAA’s website has a powerful car-finding feature known as the Car Buying Service. It’s similar to what you’d find on AutoTrader or Cars.com. You can use it to find your preferred vehicle make and model at a dealer in your area. When you use the Car Buying Service and take out an auto loan on your eventual purchase with USAA, your interest rate is reduced by 0.50%.
USAA also has a network of USAA Certified Dealers that offers special car-buying discounts (according to USAA, members save an average of $3,554 off MSRP for new cars, but they’re subject to change at any time). 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 credit monitoring and ID protection packages:
- CreditCheck & ID Monitor (1-Bureau). For $7.95 per month, this includes one monthly Experian VantageScore and one monthly Experian report.
- CreditCheck & ID Monitor (3-Bureau). For $12.95 per month, this includes monthly VantageScores and credit reports from all three major credit reporting bureaus.
A third plan, CreditCheck, includes a monthly Experian VantageScore and yearly Experian report at no charge.
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 your 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. 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. Lots of Credit Card Options
USAA has an unusually rich, varied slate of rewards credit cards. Whether you’re looking for a basic low APR interest credit card or a premium cash back product, you can find it here. This is a big advantage over smaller banks and credit unions, which typically offer just one or two token credit cards – forcing customers seeking higher-end products to flee to the competition. For more, check out our roundup of the top cash back credit cards.
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 Yields Aren’t Competitive With 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. Savings yields top out around 1.15% APY, and that decidedly mediocre rate requires a hefty $1 million balance to trigger.
Most yields on USAA’s CDs with multi-year terms top out below 1.50%. The highest available USAA CD yield is 2.22% – and that’s only for customers willing to lock up their funds for 7 years.
USAA’s yields have remained behind the curve as prevailing rates have ticked up, exacerbating the deficiency. If you’re chasing yields on FDIC-insured savings products, you definitely want to look beyond USAA.
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 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. The design has become more responsive since I’ve been watching USAA, but it’s still light-years behind the most mobile-friendly financial institutions out there.
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.