There are certainly a number of positive attributes involving USAA. It is a common misconception that they are a credit union since they require membership and offer below-average interest rates on loans and credit cards. And for those with bad credit, their secured credit card offers several advantages:
- Reasonable cost: With an annual fee of $35 per year, this is certainly a lot less than what many other banks and card issuers charge for those with impaired credit. For example, First Premier Bank charges upwards of $100 or more per year just to get a card with a credit limit as low as $300.
- Low foreign transaction fees: For active military who are deployed overseas, this benefit definitely comes in handy- the surcharge for purchases outside the US is only 1 percent. Other issuers will tack on 2 percent to 3 percent for that.
- Low APR: As with any credit card, as long as you pay your USAA secured account in full each month, you don’t have to worry about interest charges. But if you carry a balance, your APR will vary based on your credit rating and will change over the life of the card based on the prime rate. The lower end of the APR spectrum for this card is quite a bit below average.
- MasterCard or AmEx: You can choose a USAA Secured MasterCard or American Express. But don’t be confused, as AmEx is not the issuer of the card. As discussed here, they are nothing more than a payment network that has contracted with USAA, just like MasterCard.
- Earns Interest:Very few secured credit cards pay interest on the security deposit, but USAA’s card does. The bad news? Interest rates are so low that it’s hardly anything to be excited about, but something is better than nothing. Right now the interest rate is 0.54 percent, but can change periodically throughout the 2-year term. That means, if you deposit $1,000, you’ll earn a little over $5 a year. I wouldn’t let this be a maker or breaker (unless your deposit is a few thousand bucks).
- Free “CreditCheck Monitoring” for 6 months: Before you get excited, let me explain how this works.
1. USAA is using ConsumerInfo.com (which is owned by Experian) to offer the monitoring.
2. Only information on Experian is monitored. Equifax and TransUnion are not included.
3. You’re not getting a FICO score. Instead you’re getting an Experian PLUS Score, which you can read about here. It’s a score that is different than FICO and it’s not used by lenders. Rather, it’s for “educational purposes” only. Therefore, while this score can help you track your credit-building progress, the benefit is nothing special considering that there are many websites out there which offer FAKO’s (FICO simulators).
The minimum initial deposit for this card is $250, and you can add additional deposits (and request a credit-limit increase) at any time. This was not the case in the past (previously increased CD deposits did not increase your credit limit), but that’s changed:
As with USAA’s other products, you must be active or retired military (or have a spouse or parent with a USAA account).
The USAA secured card has a lot of advantages (including some not found on other secured cards). However, as with all cards, definitely consider this just a starter card to build your credit. Once you qualify for regular cards, upgrade right away to avoid paying an annual fee on a card with no rewards.
Don’t qualify for USAA’s financial products? Consider this low-cost secured product.
Updated July 2016