New Year’s Resolution: joining NFCU, PenFed, and USAA

Have you made a New Year’s resolution to “do something” about your finances?

I’ve been getting questions about membership in three great companies: Navy Federal Credit Union, Pentagon Federal Credit Union, and USAA. Many of the queries are whether you can join even if you’re no longer in the military, or whether you can join if your family was in the military. The aging Boomer generation has made these companies uncomfortably aware that their customer base is shrinking, so they’ve expanded their eligibility. Veterans who could never qualify for membership gave up asking about it years ago, yet today many of them can sign up.

Let’s see how each company can improve your finances, and maybe even your financial life.

Navy Federal Credit Union

One example is NFCU.  Decades ago they generally offered membership only to Navy officers. Sailors actually used to try to visit the NFCU offices in Yokosuka, Japan, because it was one of the few locations that “allowed” enlisted to sign up for membership. Once the Cold War ended, though, NFCU’s eligible population was drastically cut back and their membership started dropping. Today they welcome almost everyone associated with every branch of the military:

  • All DoD uniformed personnel: Army, Marine Corps, Navy and Air Force retirees and annuitants*
  • All DoD Reservists: Army, Marine Corps, Navy and Air Force retirees and annuitants
  • All Army and Air National Guard Personnel: civilian employees, retirees and annuitants
  • All DoD Officer Candidate programs (including ROTC)
  • U.S. Government employees assigned to DoD installations (including Coast Guard)
  • All DoD civilian employees: including retirees and annuitants
  • DoD contractors assigned to U.S. Government installations
  • Family Members: including grandparents, parents, spouses, siblings, grandchildren, children (including adopted and stepchildren) and household members

Once your family members have joined, their family members are also eligible for membership.

(* Yes, NFCU says this includes the Coast Guard, even though technically they’re not always considered to be part of DoD.)

Why should you care about NFCU? First, they’re a credit union: a non-profit organization owned by its members. This means that they’re not under pressure to raise profits for their stockholders, so they can offer higher deposit rates and lower loan rates. Not only that, NFCU is the nation’s largest credit union— over twice the size of their nearest competitor. Deposits are insured by the National Credit Union Association, similar to the way that bank deposits are insured by the FDIC. (One major difference is that the NCUA is in better financial health than the FDIC.) Because of their non-profit status, NFCU is in better shape than many banks.

I’ve been a member since I joined the military in 1978, but you don’t have to be near a military base to enjoy NFCU’s benefits. They have offices all over the world, too, but you don’t have to visit them either. During the last decade I’ve only been in a NFCU office to buy a certified check. Today I use my NFCU card at a Wal-Mart (!) ATM with no fees. I deposit checks on my scanner. We applied for our last NFCU mortgage online and we signed the closing documents at the title company. If you’re on active duty, your pay deposit is even available to you a day before the federal government actually transfers it to your account!

NFCU also offers business checking. If you’re a military spouse then you may also be an entrepreneur who’s paid in cash and paper checks, but NFCU will be there for your business at every duty station around the world. When you transfer you won’t need a new bank, let alone new checks.

Even if you’re not a NFCU member, you can use their wide array of online financial calculators. They make it very easy to compare loans and lenders as well as to decide whether to refinance a mortgage or pay it off.

Pentagon Federal Credit Union

NFCU may be leading the parade as the nation’s largest credit union, but PenFed is the scrappy little underdog nipping at their heels. They’re actually #3 in deposits, but they’re usually #1 for highest CD yields and lowest mortgage rates.

The beauty of PenFed is that their membership is open to everyone, whether they’re affiliated with the military or not. You can join for free if you’re a servicemember or a veteran or a member of a number of other organizations, but anyone can become a member by making a single small donation to charities supported by PenFed.

Imagine that.  A non-profit organization using their customer’s money to support military charities. What a great idea. Someone should write a book…

I dragged my feet for years before joining PenFed, and it cost me quite a bit of profit. Until a few years ago, Navy retirees had to join by making a contribution to a PenFed-supported charity. It was an extra hassle to open yet another financial account– so I’d foolishly decided to “stay loyal” to NFCU and save my $15 donation. Then I noticed that PenFed’s CD rates were regularly 0.25% higher than NFCU. I finally joined when PenFed members on pointed out that PenFed’s website is incredibly convenient for buying CDs. (That $15 paid itself back with my first CD.) Today I’ve been a member for over five years but I’ve never even visited a brick-and-mortar branch.

PenFed is also an early leader in online mortgage applications. Over a year ago we managed to score a 30-year fixed-rate mortgage at 3.625% for only two points in fees. Other member have enjoyed their home equity line of credit and their incredibly low short-term adjustable-rate mortgages. Even if you’re aggressively paying down a mortgage, a short-term PenFed loan can save a tremendous amount of interest in just a few years.

I should mention that PenFed can offer such great rates because they don’t spend much on infrastructure. They have fewer branches than NFCU, they depend heavily on their website, they centralize their customer service on the East Coast, and they use contractors to handle most of their mortgage business. They can be difficult to reach on the phone and their member service reps don’t always have the answers. If you’re looking for more than great plain-vanilla CDs or straightforward mortgages (from their website) then you may have difficulty finding the support you want.

Full disclosure: we had a very unpleasant customer-service experience when we applied for that mortgage. We knew the process and we persevered to a successful closing, but PenFed’s customer-service staff was more hindrance than help. Most of their problems came from one individual among their extremely high volume of applications, plus our different Hawaii laws, but that refi was an example of PenFed’s great rates at the convenience of great customer service. You get exactly what you pay for. This was a minor blot on an otherwise perfect record with their CDs and their home-equity line of credit.


USAA has dramatically expanded their membership. From 1922’s founding up through the 1990s their membership came mostly from military officers. However, they also needed to expand their customer base, so in 1996 they began opening their ranks. Today they advertise their membership eligibility as “All who have served honorably” and their families. Along the way they’ve grown to be #145 in the Fortune 500  and America’s eighth-largest property & casualty insurance company. Not bad for “only” having eight million members among the estimated 60 million who are eligible.

You can take a look at USAA’s product line at this link, or click on the links in the ads at the top of the post and in the sidebar.

Holy cow, I’m already over 1300 words. I’ve saved the best for last, so I’ll deal with the rest of USAA’s services in the next post.

In the meantime, take a look at the links below and decide how they could help your net worth.  If you’ve been reading this blog then you probably don’t need to start your finances from zero– but you could certainly give them a checkup, persuade them to eat better,  and show them a more challenging workout…

Related articles:
about Credit Union Banking
Chasing yield
So where should I invest my money now?!?
Tailor your investments to your military pay and your pension
Where to put your savings while you’re in the military
Simple ways to start saving 
Start saving early

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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.

  1. My experiences with PenFed regarding their very restrictive credit card rules led me back to USAA. PenFed is not the most accommodating to people who travel a lot and use their credit card. I was stranded twice overseas and once in east Texas (needed gas – ‘nuf said). Never again – that being said, you are correct, their rates for CDs and mortgages are some of the best.

    I will be looking at NFCU for my business account – my international business needs something a bit more flexible than the ‘local’ credit union I have right now.

    USAA has been great, although they sometimes can be a bit too nosy regarding your ‘relationships.’ We caught them canvassing outside of the normal circle of family for ‘debt’ collection. In today’s era of step-families, etc, this can be an issue one doesn’t need their bank to become involved.

    Thanks for yet another awesome post.

    • You’re welcome!

      I think I’ve been stranded at least once by every credit card I’ve ever owned…

      USAA has been talking about business checking for some time but the regulatory hurdles give everyone pause. They got a big push for it last September at the blogger conference and promised to take a good look at it. Until then NFCU at $35/month is about the only option.

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