Joining NFCU, PenFed, and USAA (part 2 of 2)

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If you’re on this page from a search engine or an outside link then you might want to read the previous post about joining Navy Federal Credit Union and Pentagon Federal Credit Union. They’re two of America’s largest credit unions with great rates on savings & mortgages.

The last post also introduced USAA, a Fortune 500 corporation and one of America’s top 10 insurance companies. USAA’s notable achievement among this group is that they’re a private company. They’re owned by the members they insure, so they can focus on member service instead of on boosting their stock price. USAA also offers great savings & mortgage rates through their banking subsidiary, and they’re competitive with NFCU and PenFed. But where USAA really shines is in exceptional worldwide member service and in the convenience of consolidating your finances.

USAA’s membership eligibility has expanded to “All who have served honorably” and their families. I know this looks too good to be true, and their policy changes over the years have confused the heck out of people. This is especially problematic if your parent “knows” that they’re not eligible, even though they haven’t checked for 20 years. Meanwhile you’d love to have the family affiliation to qualify for your own membership, but first you have to persuade Mom or Dad to join before you can sign up.

Here’s a typical question:

So, Nords, what you’re saying is that I could use some USAA services (my father was drafted in the early 60s) even if he never used their products? I’m not sure if he did – I’ll have to ask him – but that’s what it looks like. He doesn’t drive and lives in an apartment, so I doubt he’ll be getting auto or homeowner’s insurance – but they do have great banking products I would be interested in if I’m eligible to use them.

I wanted to make sure I answered correctly, so I ran this by Mike Kelly. He’s USAA’s Executive Director of Military Communications and a military veteran. I spent some time talking with him at their September blogger conference– good guy. Mike readily admits that the details of USAA’s membership requirements can be “convoluted & confusing”.

USAA’s membership rules mean that if your father received an “honorable” discharge, then he served honorably. However Mike also says:

“There has to be an eligible member who establishes membership before it is passed on to adult children. Membership had to have been before the eligible member passes away. Once the chain is broken it can’t be recreated.”

The nitty-gritty details of the membership eligibility requirements are on USAA’s website.  So if you wanted to have USAA’s vehicle or property insurance then your father would have to sign up for membership, and then you’d be able to sign up for membership: 1-800-531-USAA (8722)

I’ve noticed over the years that USAA’s customer service inspires enthusiasm or anger, but not apathy. It’s rare to see an organization that inspires such emotion both for and against their services. In my last 30 years with them they’ve made their share of annoying decisions, but their claims service has been prompt and fair. Their premiums have been unbeatable. They’ve gone the extra mile many times with their military members, and their spending decisions are based on member services instead of profit.

Full disclosure: USAA invited me to that blogger conference for a preview of their new financial products & services. They paid for the airfare, the hotel, and the San Antonio BBQ. (It was yummy.) I got a free t-shirt, too! But the money they spent on my Hawaii round-trip coach ticket pales in comparison to the cash I’ve saved over the years with their low auto insurance premiums. Several years before, when I was just an anonymous unpublished writer retired military member and our daughter earned her license, USAA pointed out that she was the third driver in a household with two cars. Our insurance rates stayed the same– even for the next 21 months until she started college. I made sure USAA understood that both us parents are retired and that our daughter was doing 90% of the driving anyway, but that was their underwriting decision. They could’ve lost a few thousand dollars on claims, but their member policies have gained a lot of customer loyalty.

Some members have been concerned about USAA’s recent spending on recruiting commercials and on “diluting” the quality of the expanded membership. (Sounds a lot like the military…) They’ve already signed up over eight million of their now 60-million eligible servicemembers, veterans, & families, and they’re still growing. However their claims rates have not gone up, and with more members they’ve been able to spend the capital to implement large-scale efficiencies that have actually streamlined claims and reduced expenses. Surprisingly, the new members who’ve been recruited by their commercials and partnerships have an even lower claims rate than existing members. In other words they’re costing less than the current membership, even after accounting for the marketing expenses. So I hope they make lots more commercials and sign up many more partnerships!

USAA sounds great– unless you don’t qualify for membership. So why bother? Well, you may not need to be a USAA member to get the services & products you want, and you can still piggyback on the membership services even if you’re not a member. USAA’s investment products, most checking and savings products, credit cards, life insurance, and shopping discounts are available to anyone, military or not, even without membership. You could be signed up for a bank account today and transferring funds for a CD tomorrow.

The only insurance you’re missing out on is auto & property. You’re still eligible for life insurance, and their expenses are spread out over a huge pool of healthier (premium-paying) customers. Their credit cards have higher limits, lower rates, and more rewards than many– because their membership tends to have lower delinquencies & defaults. Their banking and investment products are spread out over a large membership of income earners who are good customers with low expenses. Their military membership is globally mobile, so USAA’s credit card even has lower expenses for overseas travel. Their currency-conversion fees are among the industry’s lowest, and they’ll reimburse ATM fees. They can spend the money for technology improvements that scale to lower their expenses, because their fraud and theft rates are lower. They were one of the first banks to offer “Deposit@Home” check deposits with a scanner, and they’ve fully implemented mobile banking on smartphone and iPad2 cameras. As mobile wallet technology spreads across America, USAA will be right behind with new services. You can enjoy the benefits of the same effort that USAA devotes to retaining its member customers, even when you’re not a member.

But where USAA really stands out, member or not, is in the convenience of consolidating all of your finances. (Have you made a New Years’ resolution to “do something” about that?) Their banking and investment branches offer CDs & mortgages that are competitive with NFCU & PenFed. These firms seem to trade off their good deals, and I’m constantly checking all three for the extra few basis points. Meanwhile their investment brokerage offers a full range of mutual funds and other products. USAA’s “Ask Scott” Halliwell and “Ask June” Walbert work full time to educate their members (and you, too) on saving, investing, and retirement planning. USAA funds are not as cheap as Vanguard but their returns are competitive and their services are much more robust & flexible. Their website offers far more services than most financial companies and you can easily move money through various accounts to deposit your paycheck, pay bills, save, and invest. With one login you can integrate your checking, savings, mortgage, credit card, CDs, and investments all under one account view for easier analysis. After you’ve done that, their USAA’s retirement planning software  leads the pack in user friendliness.

So now you have three great choices to help you sort out your financial life. They all offer the industry’s most competitive rates with some of its best customer service. They attract a high-quality membership whose lower expenses can benefit your lower costs. They’re big enough to spend the capital on the technology that reduces expenses even further– while making it that much easier to manage your money.

Best of all, you don’t have to be in uniform to join them.

Contact USAA and see what they can for you. If they can’t answer your questions, then post them here and I’ll find out.

Related articles:
PTMoney, another great personal-finance blogger, talks about USAA
Answers to USAA’s questions
USAA: seven money rules to break
USAA on retirement calculators
Personal finance, mobile banking, and mobile wallets
Pricing insurance and investments

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

3 Comments
  1. […] articles: USAA’s membership application (1-800-531-8722) Joining NFCU, PenFed, and USAA (part 2 of 2) USAA’s retirement planner and financial goal-planning […]

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    […] articles: USAA’s membership application (1-800-531-8722) Joining NFCU, PenFed, and USAA (part 2 of 2) USAA’s retirement planner and financial goal-planning […]

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