The USAA Secured Credit Card has a Hidden Trap

Posted by CreditCardGuru

There are a lot of good things to say about USAA. Contrary to popular belief they are not a credit union, but they certainly feel like one given their 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 cheaper than what many other guys charge for bad credit customers. 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…. pretty pathetic, huh?
  • 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%. Most card issuers will tack on 2-3% 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, the APR is definitely below average at 9.9%.
  • 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 when it comes to USAA accounts.
  • Earns Interest: Not all secured credit cards pay interest on the security deposit, but USAA does. The bad news? Interest rates are so low right now, that means you will hardly be earning anything. As I write this review, here is the published rate on the application:
    CD ratesRun that numbers and that means on a $1,000 security deposit, you’re only earning $11 of interest in one year. Obviously it’s better than nothing, but given the ultra low CD rates right now, 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 this benefit is nothing special considering that there are many websites out there which offer FAKO’s (FICO simulators).

And what’s the hidden trap?

A quick review of the benefits and there’s no denying USAA’s secured card has a lot going for it. However there is something very important that you need to know about before you apply for it…

You can never raise your credit limit!

With most secured credit cards, you can add more money whenever you want to increase your credit limit. But with the USAA secured credit cards you can’t do that. Even if you add more money in the future, your limit will be the same as whatever your initial deposit was.

security deposit CD

Having decent credit limits is important for your score. If you’re trying to build or rebuild your credit, it helps to have a respectable credit line on your card. Ideally that means in the 4-figures, not 3’s.

With a USAA secured credit card the minimum deposit is only $250. If you’re going to apply for it, I would wait until you have more money than that. Because whatever amount you start with will end up being your credit limit for the life of your account. Don’t get trapped with a low limit.

If you don’t have much money to begin with, then I would recommend you start with something different. Why? Because most other secured cards will allow you to add to your deposit at any time in order to increase your limit. Here is my favorite low-cost secured card that does that.


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Editorial Disclosure: The editorial content on this page is not provided by any bank, credit card issuer, airline or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

22 comments... read them below or add your own

  1. Stephen July 8, 2014 at 5:39AM

    Incredible secured card. The only one on the market that’s even close is the Citibank secured cards. A few things to keep in mind

    1- Yes. This is a military benefit. Their insurance rates are extreme competitive and service second to none.

    2- The card does have one pitfall. Because they run at such a low margin on these, they take little to no risk. To those ends, if you pay your bill from a non USAA account, it’s 10 business days until those funds become available.

    Example- to build credit, I pay off my balance each month. My credit limit and balance are 1k this for the sake of this exercise. My bill comes and I autopay the balance from my Chase account giving me a zero balance. Cool, as long as I don’t need the funds available on that card. It will show my zero balance, but funds available will remain at zero for 10 business days

  2. Jeremy Y February 17, 2014 at 12:34PM

    Well I have been with USAA for a few years, I am deciding to open up a secured credit card. You can in fact request for a higher limit by depositing more money in to your CD as stated on their website.

    Your CD will earn interest at a variable rate (currently 0.54% Annual Percentage Yield) which will change periodically throughout your two-year term.1 Plus, our variable rate CD allows you to make additional deposits to your CD at any time — in case you want to build up your savings. When you make additional deposits you can request a credit limit increase on your secured credit card.

    So I guess when I get $300 to deposit ill go and sign up. It looks like a cheap and easy way to start helping build my credit back up.

  3. vasilisa February 16, 2014 at 9:12PM

    How much do I get charged if I decide to close out/ terminate my CD early?

  4. Aaron K. McNeil January 30, 2014 at 10:58AM

    YOU CAN RAISE YOUR LIMIT WITH THE SECURED CREDIT CARD OF USAA!!!!

    While it may have been locked in the past, you can raise the limit of your secured card by adding to the CD up to $5000.00. You can do it in 50.00 increments.

  5. Paul December 27, 2013 at 9:49AM

    I have a checking & savings with USAA, but not in the military (opened these accounts @the time when it was open to everyone)… Would I be able to qualify for the USAA secured credit card???

    • Donny April 20, 2014 at 5:01PM

      No it’s only open to military and military families.

  6. George December 11, 2013 at 1:11PM

    I had a secure M/C with USAA and everything was great until I went on long term disability for medical reasons. I had to file bankruptcy due to a 40% pay cut but, we re-affirmed the debt to keep the card but they closed my C/C account and told me I have no banking benefits for 7 to 10 years. Now when I login to the web-site, it kicks me to the Mobile login which is the only one I can use now due to the bankruptcy. I will be closing my accounts and going back to Navy Federal Credit Union.

  7. Jami December 8, 2013 at 1:42PM

    You obviously haven’t done much research. Yes USAA does make you pay an annual fee of $35, the APR is 9.9%, and the CD is set at a lower rate (.54%). They also provide Experian for 6 months for free.
    What you are wrong about is that Members can add money at ANY time to up credit limit. (Every 24 hours actually) You can start at $250 and move your way up to $5000. This card is no scam. This is actually one of the best secured cards you can get from a company.
    Let’s look at other banks that start your APR at 21.9% on purchases alone. USAA is set at 9.9% for both purchases and cash advances, the lowest that USAA offers (with the exception of the Rate Advantage Card). Most banks don’t offer free credit check monitoring with the card. So what that it’s not exact, like you said it’s a building tool… Most banks also do a hard hit to your credit when both applying for a card and to up the credit. USAA does neither.
    The only thing that stinks is that it will never graduate into a regular card, but is becoming a possibility in the future-do some research next time. :)

  8. Adam December 3, 2013 at 7:28AM

    I don’t know what everyone is bitching about. It’s a military bank so you have no place to call it a scam. It advertises military and family dumb dumb. Anyways I had a 550 credit score and lower on other reports. I started out with a 500 cd / MasterCard and 18 months later I have a 5000 dollar card and a 2000 dollar card that i slowly increased every month. So yes you can keep adding to thecd as you please and now I’m buying a home so all you lying shmucks can pound sand. Thank you usaa because of you I have good credit savings a home and other credit from other civilian lenders. Sempervivum to and go usaa

  9. Sgt Lopez,M November 11, 2013 at 5:43PM

    I suggest for those people in doubt about of USAA services you should inquire by doing some research.I like to say USAA is mainly concern with the military and it’s families.If you get a secure credit card they require a $250 deposit and you can’t increase your limit,they give you 1% interest rate earning $11 on a $1000 annually at a card rate of 9.99 % So the best Secure card is Navy Federal at 8.99% rate after 12 months it becomes an ensecure credit card,but you to be military or a family member. I hope this helps.

  10. Bob November 5, 2013 at 10:57AM

    I got the secured card from USAA with a $2500 limit. The only drawback I have found so far is that it takes 8 – 10 days for a payment to get processed. If you make a $500 payment, don’t expect it to show up on your credit limit for at least 8 days……..

  11. Tucker September 14, 2013 at 6:48PM

    Per the USAA site now:

    “Save for your future the safe and easy way

    Your CD will earn interest at a variable rate (currently 0.54% Annual Percentage Yield) which will change periodically throughout your two-year term. Plus, our variable rate CD allows you to make additional deposits to your CD at any time — in case you want to build up your savings. When you make additional deposits you can request a credit limit increase on your secured credit card.”

  12. jim July 31, 2013 at 12:02PM

    Don’t be misled like I was about this secured card. I signed up and account and tried for 3 days to signup for a secure card and finally contacted their support and they told me this secure card offer was only available to military members and not the general public. No where when I signed up did they mention that. So basically I entered in all of my personal info including SS and it was for nothing. For this reason I label this a scam. Stay away from USAA and their misleading marketing practices.

    • James August 4, 2013 at 7:47PM

      Cry More, Your not military, so your a nobody, you deserve nothing. Pay your bills on time and get a regular credit card at a civilian bank you bum. USAA is great!

      • sarah August 23, 2013 at 2:32PM

        James-
        That’s incredibly ignorant. So please tell that to the next dr saving whomever it is you care about, that because they aren’t military they aren’t needed. I have nothing but the utmost respect for the military but people like you are incredibly ignorant. You think just because you’ve seen war no civilian can have it hard. Go back over seas and stay there.

      • Cherise October 4, 2013 at 10:09AM

        Jim-

        Sorry, i agree with james here. USAA is one of the best companies i’ve ever had the pleasure of working with (around 8 years now). My entire family is customers as well. Sorry you had a bad experience but you are giving completely the wrong impression. Any military family KNOWS how good they are. No one ever has anything bad to say about them. Your comment was not fair.

    • christina October 25, 2013 at 6:17AM

      Jim I am sorry you ran into that issue but I have had USAA for almost 13 years now they are a great company and not a scam

    • Brian December 13, 2013 at 8:43PM

      Your as stupid as they come. Please do the world a favor and refrain from reproducing. USAA is known for being a military benefit. Yes reserved for those of us who served our country not for idiots who sit back and complain about everything in our country especially complaining about one of the very few benefits ex military servicemen and servicewomen get. You wont go far in life expecting everything someone else who did their part gets. I bet your on welfare too but if you don’t qualify I’m sure you will label that a scam too.

      USAA is an incredible deal on everything from banking to insurance. I hate ALL insurance companies except USAA. They are THE only company that has always stood by my side when even I don’t think they should have. I will always keep them and have the highest respect for them

      You are an I.D ten Tango. Serve your country to find out what that means

    • TROY April 13, 2014 at 7:04PM

      Jim, I think you been living in a cave for a while . Everyone knows that USAA is only offered to military personnel and their offspring. I was never in the military but my father was. So I’m a second generation insurance and credit card carrier. Now my children , who were never in the military are third generation carriers. Sometimes , you just have to read the fine print. Actually , you should read everything before you ever divulge ss numbers and other personal info.

  13. Carlos March 26, 2013 at 1:46PM

    What are the minimum requirements to obtain this credit card? I have a USAA bank account but every time I call in I get a different story.

  14. DRock December 3, 2012 at 9:44AM

    Elizabeth is absolutely correct! We started at $300 and now are at $650. It is also reporting correctly on all three CBR’s.

  15. Elizabeth December 1, 2012 at 11:29AM

    All new secured cards through USAA are able to have raised limits.
    Old cards cannot. I believe the date of chance is 12/30/2011.

    It’s a great program if you can become a USAA member.

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