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Who Can Get A USAA Account

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 15 minute read

USAA (United Services Automobile Association) has been providing a wide range of financial services to active-duty and retired members of the United States Armed Forces, as well as their families, for nearly a century. 

The San Antonio-based private organization was founded in 1922 by 25 military officers who were unable to locate an insurer to cover their automobiles, as stated on the company’s website.

Using a network of a dozen wholly owned companies, USAA now offers financial services, retirement planning, and even flood insurance to its customers. The parent firm of these affiliates, USAA, is an inter-insurance exchange organized under Texas law and controlled by its members. 

As opposed to the standard corporation, this structure is based on mutual aid and cooperation. Insurance policies are available for purchase by all participants. Owners of USAA shares are entitled to a distribution of the company’s annual profits.

With only about 20 locations across North America and Europe (London and Frankfurt, Germany), USAA must rely on the internet and telephone for the bulk of its operations. USAA is geared toward people who are in the military or have family members who are.

Who Is Eligible to Join USAA?

Even though USAA has evolved greatly since its inception in the 1920s, the company has never lost sight of its initial market: military personnel and their families. This effectively disqualifies vast swaths of the U.S. populace from becoming members.

USAA membership is open to the following demographics:

  • Personnel on Active Duty, in Retirement, or with an Honorable Discharge. You can join if you are or were a member of the armed forces in good standing.
  • The Naval Academy’s Cadets and the Navy’s Midshipmen. Students at service academies and in the ROTC program fall into this category.
  • Family members’ offspring. The next generation of service members and their families are welcome to join USAA.
  • Spouses of active and retired military personnel. In case your spouse qualifies for USAA membership, your eligibility will be automatically determined. If you get divorced or your spouse passes away, you will still receive this benefit.

What Benefits Does USAA Offer Non-Members?

Investing accounts, life insurance, and member discounts are just a few of the USAA services that may be available to you even if you don’t meet the membership requirements. However, non-members can’t get access to the other kinds of insurance, loans, banking products, and credit cards that members may.

It is recommended to contact USAA directly before attempting to buy any products or services as a nonmember, as USAA’s policy on nonmembers is subject to change.

Personal Banking Products from USAA

Checking, savings, and CD accounts are all available from USAA.

Savings Accounts

USAA has two different bank accounts available:

  • Standardized Checking. The Classic Checking account requires a minimum deposit of $25, does not require a minimum balance to be kept in the account, does not charge a monthly maintenance fee, allows for unlimited transfers to other checking accounts at no additional cost, and offers an APY of 0.01% on balances over $1,000.
  • Expenditure by Young People. Money deposited into a Youth Spending account is held in trust for minors. Access to surcharge-free ATMs at network partners, unlimited transfers, and a low minimum opening deposit of $25 is all features. The USAA mobile banking app is available to minor account holders as of the age of 13.

Deposit Accounts

USAA provides two different savings accounts that are both free of charge:

  • The USAA Savings account requires a $25 starting deposit and offers a modest interest rate of 0.01% – 0.05%, depending on the amount in the account. Using an ATM and transferring money between accounts is at no cost to you.
  • Emphasis on Effectiveness. The lowest beginning deposit for Performance First is $10,000, and the highest rates are available for balances beyond $250,000. The use of ATMs and transfers between bank accounts is costless.

CDs

USAA provides certificates of deposits with maturities ranging from 30 days to 7 years at a set interest rate. Rates are tied to market conditions and rise in tandem with the maturity of the CD.

Products for Investment by USAA

USAA provides a variety of investment options, including taxable brokerage accounts, tax-deferred retirement accounts, retirement annuities, and 529 college savings plans.

Standard Brokerage Accounts (General Investing)

With a minimum beginning deposit of $3,000, USAA’s classic brokerage accounts allow you to trade stocks, bonds, options, mutual funds, and certificates of deposit. While there are no charges associated with trading stocks, trading options and bonds can cost anywhere from $25 to $45 each trade, plus contract fees.

USAA offers a wide variety of funds with no transaction fees. In general, the $45 charges charged by no-load transaction fee funds make them unsuitable for low-dollar investors.

Accounts for retirement

USAA provides several different types of individual retirement accounts, including regular and Roth IRAs, SEP IRAs, and SIMPLE IRAs. Like USAA’s brokerage accounts, these come with a range of fees and commissions. All of USAA’s mutual funds, managed portfolios, and annuities are available to their customers.

Controlled Portfolios

Managed portfolios offered by USAA, both taxable and tax-advantaged, use automated investing technologies to spread client funds out over semi-customized baskets of ETFs and rebalance them on a regular basis. 

USAA constructs portfolios with an increased emphasis on equities for customers with higher risk tolerance, a decreased emphasis on equities, and an increase in fixed-income instruments for those with lower risk tolerance.

USAA charges a management fee of 1% of assets under management, with a $275 yearly minimum, regardless of the client’s asset allocation. There is the possibility that the costs associated with the individual funds within a portfolio will exceed the cost of account management provided by USAA. 

Still, you won’t have to worry about paying any commissions or fees when you make a trade. The starting point for investment is $25,000.

USAA provides a wide variety of investment accounts, including:

  • 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 and Outside Funds

The United Services Automobile Association (USAA) manages a wide variety of its own mutual funds. Money market funds and short-term bond funds are on the safe end of the spectrum, while small-cap stock funds and a fund that tracks the performance of the technology-focused NASDAQ 100 are on the riskier end.

Expense ratios under 1% are typically considered conservative. Expense ratios for actively managed funds frequently exceed 1%. These costs may increase or decrease in the future. Investing in a mutual fund typically necessitates a minimum of $50 and a subsequent monthly commitment of $50.

Traditional brokerage accounts and tax-deferred retirement accounts offered by USAA allow you to invest in funds managed by USAA. There are thousands of funds available from issuers other than Vanguard and T. Rowe Price that can be accessed through those accounts.

Annuities

Deferred and income annuities (Single Premium) are among USAA’s products (Flexible Retirement and Extended Guarantee).

With an instant annuity, you can choose to receive fixed monthly payments for a set amount of time often 10 years or for the rest of your life; in exchange, you make a lump sum investment. 

You can invest your money in a deferred annuity and watch it grow tax-free and fee-free until you reach retirement age. An individual can start an Extended Guarantee annuity with as little as $10,000 and a Flexible Retirement annuity with as little as $5,000.

Investment amounts, account holders’ locations, and the type of deferred annuity all affect the rates offered. United Services Automobile Association (USAA) does not provide immediate annuity rates.

Accounts 529 (Education Savings)

You can avoid paying federal taxes on the growth of funds in a USAA 529 savings account as long as those funds are used to pay for qualified higher education or elementary and secondary school costs. 

Initiating a monthly deposit of at least $50 is required instead of the initial $250 deposit. Check with USAA to discover if the goods you’re interested in are offered in your state.

Loan Products from USAA

USAA Finance can help you get a loan for a home, car, motorcycle, boat, or another unique vehicle.

Mortgage Loans

Mortgage loans for purchasing or refinancing a house are available from USAA. There are five main types: conventional, jumbo, VA, and FHA loans, as well as adjustable-rate mortgages with terms of 15, 20, or 25 years.

According to the nature of the goods, the terms can be anywhere from 10 to 30 years. Rates are highly product-specific but typically compare favorably to those of other large lenders offering similar products. It’s essential to double verify with USAA before you commit to a purchase because they could change suddenly.

Loan Refinancing

USAA provides VA streamlined refinancing options, in addition to traditional and cash-out refinancing for mortgages (VA IRRRLs). Competitive with other big issuers in terms of rates. There are maximum loan-to-value (LTV) ratios that can be granted for certain loan types and purposes.

For instance, the loan-to-value (LTV) ratio for a traditional refinancing loan is as high as 95%, while for a cash-out refinancing loan, it cannot exceed 80%. VA IRRRLs can provide LTVs of up to 100%.

The Auto Loans

USAA provides loans for the purchase of a brand new vehicle, the purchase of a previously owned vehicle, or the refinancing of an existing loan. Loan rates for both new and used vehicles begin at 2.59 percent annually. 

Your specific interest rate will be based on your credit history, as well as local and national market conditions. USAA does not set a maximum loan amount for either personal or business loans.

Other Auto Loans

USAA also provides financing for recreational vehicles, watercraft, and bikes. Depending on your credit history, where you live, and the sort of car you want to finance, the interest rate on one of these loans could be several percentage points greater than that of a standard auto loan. No advance notice will be given if they are altered.

Individual Loans

USAA offers members unsecured personal loans with minimum borrowing amounts of $2500. Variables such as loan quantity and credit history can push rates well above 10%. 

The organization does not set a cap on rates or principal amounts, but the more money you borrow, the stiffer its requirements get. The contract duration can be anywhere between 12 and 84 months.

Insurance Products from USAA

Auto insurance, specialty vehicle insurance, home insurance, flood insurance, and life insurance are just some of the coverage options provided by USAA.

Vehicle Insurance

USAA provides car insurance to its members in all 50 states and in some other countries (typically where the U.S. military has a presence).

Features including accident forgiveness, safe driver discounts, family and bundle discounts, customer loyalty discounts, and roadside assistance are standard among large insurers such as Progressive and State Farm.

Discounts of up to 15 percent are available to USAA auto insurance clients who park their cars on base, and the company also offers flexible payment plans that may be adjusted to accommodate different military salaries. 

Officers in training, for instance, might be able to put off paying a portion of their premiums until they receive their full officer commissions, which would allow them to pay less out of pocket. When customers bundle their vehicle and home insurance, they receive a 10% discount.

Additional Auto Insurance

In addition to car insurance, USAA also provides coverage for boats, RVs, motorbikes, airplanes, and historic cars. Policyholders and their vehicles have a different premium and term options.

Property and Home Insurance

Homeowners insurance, renters insurance, and insurance for rental or investment properties are just some of the options for protecting your home and belongings provided by USAA.

Flood Protection

USAA sells NFIP-backed flood insurance plans through its wholly-owned subsidiary, USAA General Indemnity Company. 

Standard insurance is more expensive and is intended for high-risk places, whereas Preferred Risk policies are more affordable and are aimed at those living in low- to medium-risk environments. Both policies provide coverage for your house and belongings up to the policy maximums of $250,000 and $100,000, respectively.

Life Insurance

USAA manages four distinct types of life insurance policies: military term (exclusive to military personnel), level term available to the general public, universal life, and whole life.

Both plans are available with maturities ranging from 10 to 30 years for term life insurance. The cost of a policy is proportional to factors including the insured’s age, location, and the amount of coverage purchased.

Cash value is accumulated in both universal and whole-life policies and can be used to secure loans in the future.

Due to its clientele, USAA’s life insurance policies must be more generous than those offered to the general public in that they do not reduce or eliminate payouts in the case of the policyholder’s death due to participation in armed conflict. 

The death benefit from a USAA policy is the same whether you pass away from a heart attack or a bomb blast in a war zone.

Medical Insurance

Members of USAA have access to major medical, dental, vision, long-term care, and other coverage from private insurance providers like Cigna as well as the military’s TRICARE health insurance system through the USAA Health Insurance Marketplace.

Although USAA is not responsible for the administration of these plans, the group’s clout in the marketplace may allow its members to negotiate reduced premiums.

Continuity Insurance

Coverage for things like legal fees and judgment amounts in a libel or slander suit is not always included in standard insurance policies but is provided under USAA’s umbrella insurance coverage. The default policy limit is $1 million. You can get monthly premiums for as little as $19.

Additional USAA Goods and Services

In addition to the USAA Subscriber’s Account and the Car Buying Service, USAA members also receive discounts at a variety of stores and on a variety of services.

Services and Benefits of Buying a Car

The Car Buying Service on USAA’s website is an excellent tool for locating a vehicle. It’s very much like what you’d see on Cars.com or AutoTrader.com. You can use it to locate local car dealerships that stock the make and model of your choice. 

There is a 0.50% reduction in your interest rate on a USAA auto loan if you use the Car Buying Service to finance your purchase.

With their network of USAA Certified Dealers, USAA members can take advantage of exclusive car-buying savings. Usual USAA discounts for new cars are $3,554 off MSRP, however, these savings could vary at any time. 

USAA will reimburse the difference if you purchase a vehicle from one dealer and then locate a cheaper quoted price at another dealer within four days of purchase.

Discounts on goods and services

USAA has negotiated special pricing with a variety of companies to provide its members with a wide range of discounts. With companies like ADT, PODS, and FTD, members may save money on things like home security systems, storage units, and flower delivery. USAA does not provide a monetary value for these savings.

Distributions and Allocations from Subscriber Accounts

A Subscriber’s Account is provided to any member who pays for a USAA insurance policy. This fund is where some of USAA’s capital reserves are kept, under the watchful eye of the board of directors. Important to USAA’s legal framework. 

The Subscriber’s Account symbolizes the Subscriber’s ownership interest in the Company, which is held in the form of a membership interest by the Subscriber.

Each insurance premium payment contributes to your Subscriber’s Account balance in direct proportion to the total premiums paid. The proportion is not disclosed and is set by the board of directors, who may change it from year to year.

USAA’s money is not yours to withdraw. A portion of your Subscriber’s Account balance may be distributed to you in December of each year, but only if the firm earns a profit and achieves financial performance targets specified by the board of directors which may vary from year to year. 

Based on the company’s financial performance, your account balance, and your lifetime premium payments, the distribution amount may change from year to year. This payment will be made to you through a check in the mail or electronic deposit into your USAA bank account.

At the 40-year mark, you’ll be entitled to an annual Senior Bonus payment, given in February. This supplemental bonus amount is subject to the same terms as the standard bonus amount.

Pros

Advantages of USAA membership include access to a wide variety of services in one convenient location, life insurance policies designed with service members in mind, a Subscriber’s Account, and protection against flood damage.

1. Wide Variety of Goods and Services Available Under One Roof

USAA has an extensive selection of products and services, especially when compared to other online-only banks. Most forms of insurance, brokerage and retirement accounts, banking services, and lending products are all covered. 

In addition to the basic features, it provides extras like identity theft insurance, cash back on major purchases like a car or house, and discounts on a variety of other goods and services.

You can take care of most or all of your financial needs with USAA. In contrast, Capital One 360 provides a wide variety of banking services and, through its acquisition of E*trade, access to online trading, but no loans or insurance. 

Allstate has a similarly extensive selection of insurance options, albeit, unlike State Farm, it does not offer banking or brokerage services.

2. War Clauses Are Not Included in Life Insurance Policies

Policyholders of USAA life insurance should not worry about having their death payments withheld or reduced due to the policyholder’s involvement in armed conflict. If you’re an active duty service member and you perish in enemy territory, your family will be compensated in the same way as if you’d died a natural death in the United States.

The payouts of most other life insurance companies are typically restricted in cases of death due to armed conflict. Service members who are actively serving and are at risk of being sent overseas may be required to pay a higher premium.

3. Possibility of Members Receiving Annual Profit Distributions

USAA members receive cash back in several forms, including rebates and discounts on auto and house insurance and other purchases. In exchange for your insurance premium payment, USAA will deposit funds into your Subscriber’s Account. 

Annual distribution of a few dollars to several hundred dollars is contingent upon the corporation meeting annual financial performance goals established by the board of directors.

For members with 40 years or more of service, the annual benefit is increased. Since traditional insurers like Allstate and Progressive aren’t owned by their policyholders, they don’t have to give out dividends to their policyholders every year.

4. Availability of flood insurance

Since the Federal Emergency Management Agency (FEMA)-run National Flood Insurance Program (NFIP) underwrites all flood insurance policies issued in the United States, many insurance companies, including industry heavyweights Allstate and Geico, don’t even sell flood insurance to their customers. 

Customers are instead referred to NFIP. USAA members, on the other hand, have access to a subsidiary of the corporation through which they can purchase NFIP-underwritten policies. This enables you to deal with only one insurance company for all your needs.

Cons

Most USAA products are only available to members, savings and CD yields are poor, customer service is unclear, and the website is difficult to navigate.

1. Nonmembers Cannot Purchase Many Products

USAA’s comprehensive product selection is unavailable to the general public because membership is limited to service members and their eligible families. 

Even if you’re not a member, you could still be able to take benefit of its brokerage accounts, life insurance, and member discounts. USAA may stop providing certain features to those who aren’t members, so it’s advisable to double-check with them first.

Insurance and banking firms that are not owned by their customers, such as Allstate and Capital One 360, have substantially looser eligibility requirements.

2. The CD and savings yields are not competitive with those offered by other online banks.

When compared to other online banks like Ally Bank and TIAA Bank, USAA’s CD and savings account rates are lower than average. 

USAA’s yields are relatively immune to changes in benchmark rates, thus this disadvantage may be mitigated if benchmark rates decline. But look elsewhere if you want higher returns on FDIC-insured savings products than USAA.

3. Customer service is difficult and unclear

Although it may be difficult to get in touch with them, USAA does have real people answering customer support calls. 

There is a main number that will take you to a touch-tone menu that will help you find the right department, however, there are so many departments that it will take a long time. USAA suggests contacting the relevant department (such as IRAs, mortgages, or vehicle loans) immediately.

Finding the appropriate contact information in USAA’s online directory, however, can be time-consuming. Since USAA’s offices are closed over the weekend, members are encouraged to phone the company on a weekday rather than Monday to avoid the hassle and wait. 

The customer care department at Ally Bank, on the other hand, is accessible around the clock by phone, and hold times are typically under 10 minutes.

4. Website Is Complicated and Hard to Navigate

The most critical elements of USAA’s website, such as the drop-down menus, are cluttered with little text, making the experience frustrating for users. Because of this, it is not optimal for usage on a portable device. The design has improved over time, but it lags far behind the most mobile-friendly banks.

Bottom Line

Being a soldier is a noble profession, but it comes with a high price. You may be qualified for membership in USAA if you are either an active-duty, retired, or honorably separated military member, or if you are a family member of such a person.

There are several advantages to becoming a member, some of which you won’t find at other financial institutions or insurance providers.

Unfortunately, not everyone can benefit from USAA’s services because only a small fraction of them are made available to customers who aren’t USAA members. 

However, the corporation seems likely to continue focusing on its primary demographic—the military—for the foreseeable future, despite having dabbled in the past with broadening eligibility rules, such as briefly welcoming personnel of the FBI and other federal law enforcement agencies.

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